UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

For the fiscal year ended December 31, 20172020

OR

Commission File No. 0-27754

HUB GROUP, INC.

(Exact name of registrant as specified in its charter)

2000 Clearwater Drive

Oak Brook, Illinois 60523

(Address and zip code of principal executive offices)

(630) 271-3600

(Registrant’s telephone number, including area code)code: (630) 271-3600

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

Securities registered pursuant to Section 12(g) of the Act:

Class A Common Stock, $.01 par value

(Title of Class)None

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

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

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒  No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 229.405 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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  ☒

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

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

TheThe aggregate market value of the Registrant’s voting stock held by non-affiliates on June 30, 2017,2020, based upon the last reported sale price on that date on the NASDAQ Global Select Market of $38.35$47.86 per share, was $1,237,047,973.$1,552,627,202.

On February 16, 2018,19, 2021, the Registrant had 33,718,24633,771,710 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.

Documents Incorporated by Reference

The Registrant’s definitive Proxy Statement for the Annual Meeting of Stockholders to be held on May 22, 201824, 2021 (the “Proxy Statement”) is incorporated by reference in Part III of this Form 10-K to the extent stated herein. Except with respect to information specifically incorporated by reference in this Form 10-K, the Proxy Statement is not deemed to be filed as a part hereof.

PART I

FORWARD LOOKING STATEMENTS

This annual report contains and our officers and representatives may from time to time make, 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. In particular, information appearing under “Business,” “Risk Factors,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” includes forward-looking statements. Forward-looking statements are neither historical facts nor assurance of future performance. Instead, they are based on our beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. Such factors include, but are not limited to, uncertainties caused by adverse economic conditions, including, without limitations, as a result of extraordinary events or circumstances such as the coronavirus (COVID-19) pandemic, and their impact on our customers’ businesses and workforce levels, disruptions of our business and operations, or the operations of our customers.  

Our actual results and financial condition may differ materially from those indicated in the forward-looking statements. All forward-looking statements made by us in this annual report are based upon information available to us on the date of this report and speak only as of the date in which they are made. Except as required by law, we expressly disclaim any obligations to publicly update any forward-looking statements whether written or oral, that may be made from time to time, whether as a result of new information, future developments or otherwise. Important factors that could cause our actual results and financial condition to differ materially from those indicated in the forward lookingforward-looking statements, in addition to those described in detail under Items 1A “Risk Factors,” include the following:

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General

Hub Group, Inc. (the “Company”, “Hub”, “we”, “us” or “our”) is a Delaware corporationleading supply chain solutions provider that was incorporatedoffers comprehensive transportation and logistics management services focused on March 8, 1995. We are a world class provider of multimodal logisticsreliability, visibility and value for our customers. Our mission is to continuously elevate each customer’s business to drive long term success. Our vision is to build the industry’s premier supply chain solutions. We offerOur service offerings include comprehensive intermodal, truck brokerage, dedicated trucking, managed transportation, freight consolidation, warehousing, last mile delivery, international transportation and other logistics services. Since our founding in 1971, we have grown to become

We are one of the largest intermodal and truck brokeragefreight transportation providers in the United States. Through our network, we haveNorth America, with the ability to arrange for the movement of freight in and out of every major city in the United States, Canada and Mexico. We utilize an asset-light strategy in orderthat employs a combination of our company-operated equipment as well as assets operated by third parties to minimizetransport and store our customers’ goods, which allows us to optimize our investment in equipment and facilities and reduce the level of capital we employ in our capital requirements. We arrange freight movement for our customers through transportation carriers and equipment providers.

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

Mode Transportation, LLC (“Mode LLC”) is our wholly-owned subsidiary acquired in 2011, and operates independently. Mode LLC has approximately 173 agents, consisting of 99 IBOs, who sell services and operate the business throughout North America and 74 sales only agents. Mode also has a temperature protected services division operated out of our Oak Brook, IL headquarters and corporate offices in Memphis, TN and Dallas, TX.

Mode LLC diversifies Hub Group’s customer base with more small and medium sized customers, as Hub has traditionally focused, to a significant degree, on larger national accounts.  Mode IBOs and sales agents are often able to devote more attention to smaller and medium sized shippers and develop long-term relationships with them.

We report two distinct business segments. The first segment is “Mode,” which includes the Mode LLC business only. Mode LLC markets and operates its freight transportation services primarily through its network of IBOs who enter into contracts with Mode LLC. The second segment is “Hub,” which is all business other than Mode. Hub operates through a network of operating centers throughout the United States, Canada and Mexico.business. Hub services a large and diversified customer base in a broad range of industries, including retail, consumer products retail and durable goods.  Hub includesWe believe our dedicatedstrategy to offer multi-modal supply chain management solutions serves to strengthen and deepen our relationships with our customers and allows us to provide a more cost effective and higher service solution.

Our service offering facilitates our customers’ desires for energy-efficient transportation solutions and both segments offerassists in meeting their objectives to reduce their environmental footprint. Our intermodal service is significantly more fuel efficient as compared to long distance trucking transportation, and we continually seek opportunities to convert our customers’ trucking transportation needs to intermodal. In addition, our logistics offering includes shipment consolidation services which seeks to maximize the amount of freight carried per mile which reduces fuel consumption. We are continuing to replace older model tractors with more energy-efficient equipment and evaluating new technologies such as electrically-powered tractors. Our GPS-enabled container fleet allows for our truck drivers to efficiently locate our containers without driving wasted miles. We are an Environmental Protection Agency (EPA) SmartWay® Transport Partner, having been awarded the EPA’s SmartWay® Excellence Award eight times since 2008. Our headquarters building in Oak Brook, IL is a LEED Gold certified building.

Our strategy includes the following elements:

We regularly evaluate acquisition and divesture transactions as a component of our strategy to enhance our core business lines and diversify our service offerings.  Our recent strategic transactions include the following:

NonstopDelivery Acquisition. On December 9, 2020, we acquired NonstopDelivery, LLC (“NSD”). NSD provides residential last mile delivery services throughout the United States. The financial results of NSD, since the date of acquisition, are included in our logistics line of business.

CaseStack Acquisition. On December 3, 2018, a subsidiary of Hub Group, Inc. completed a merger with CaseStack, Inc. (the “CaseStack Acquisition”). CaseStack is a non-asset-based transportation and logistics provider operating in two lines of business. The logistics business provides warehouse and transportation logistics services, including retailer-driven collaborative consolidation programs, to customers who primarily consist of consumer goods companies selling into the North American retail channel. The transportation brokerage business offers truck brokerage services with a focus on less-than-truckload services.  

Mode Sale. On August 31, 2018, we sold the membership interests of our Mode Transportation, LLC (“Mode”) subsidiary (the “Disposition”) to an affiliate of York Capital Management (“Purchaser”). Mode’s temperature protected division was not included in the transaction and logistics services. “Hub Group” includes both segments.is included in our intermodal line of business. Mode provided transportation management services to its customers through a network of approximately 170 agents.  

Services Provided

Our transportation services for both the Hub and the Mode segmentslines of business can be broadly placed into the following categories:categorized as follows:

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 withdelivery services between origin or destination and rail terminals (referred to as “drayage”) are provided by our Hub Group Trucking, Inc. (“HGT”) subsidiary and third-party local trucking companies, knowncompanies.  

In a typical intermodal transaction, the customer places an order with us and we determine the price and arrange for the necessary intermodal equipment (which includes a container and chassis) to be delivered to the customer by HGT or a third-party drayage company. After the freight is loaded, we arrange for the transportation of the container to the rail terminal where it is transported by the railroad to the destination rail terminal. Our predictive track and trace technology then monitors the shipment to ensure that it arrives as “drayage companies,”scheduled and alerts our customer service personnel if there are service delays. We then arrange for pickup and delivery. As part of our intermodal services, we negotiate rail andconfirm delivery by a drayage rates, electronically track shipments in transit, consolidate billing and handle claimscompany at the destination. After unloading, the empty equipment is made available for freight loss or damage on behalf of our customers.reloading.

As of December 31, 2017,2020, we owned a total of approximately 32,00041,500 53-foot private containers and we had exclusive access to approximately 2,500 rail-owned containers forthat support our dedicated use on the Union Pacific (“UP”) and the Norfolk Southern (“NS”) rails. We use our network to access containers and trailers owned by leasing companies, railroads and steamship lines. We are able to track trailers and containers entering a service area and reuse that equipment to fulfill the customers’ outbound shipping requirements. This effectively allows us to “capture” containers and trailers that we do not own or have exclusive access to and keep them within our network.intermodal offering.

During 2017,2020, HGT accounted for approximately 54%56% of Hub’s drayage needs by assisting us in providing reliable, cost effective intermodaltransportation services to our customers. As of December 31, 20172020, HGT had terminals in the Atlanta, Birmingham, Boston, Charlotte, Chattanooga, Chicago, Dallas, Edinburg (TX), Harrisburg, Huntsville, Indianapolis, Jacksonville, Kalamazoo, Kansas City,Laredo, Memphis, Milwaukee, Memphis, Nashville, Newark, Philadelphia, Portland (OR), Salt Lake City, San Bernardino, Seattle, St. Louis, Stockton and Wilmington (IL) metro areas. As of December 31, 2017,2020, HGT leased or owned approximately 9001,500 tractors and 300200 trailers, employed approximately 1,0001,400 drivers and contracted with approximately 1,500900 owner-operators.

2Logistics. Our logistics business 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. Our multi-modal transportation capabilities include small parcel, heavyweight, expedited, less-than-truckload, truckload, intermodal, last mile, railcar and international shipping. We leverage proprietary technology along with collaborative relationships with retailers and logistics providers to deliver cost savings and performance-enhancing supply chain services to consumer goods clients. We contract with third-party warehouse providers in seven markets across North America to which our customers ship their goods to be stored and eventually consolidated, along with goods from other customers, into full truckload shipments destined to major North American retailers. These services offer our customers shipment visibility, transportation cost savings, high service and compliance with retailers’ increasingly stringent supply chain requirements.

Dedicated: In December 2020, we expanded our logistics services through the acquisition of NSD. NSD provides basic, threshold and white glove residential last mile delivery services including warehousing and distribution, product assembly and reverse logistics to many of the largest retailers in the United States. NSD operates a non-asset business model, working with a network of over 170 carriers through the country. NSD provides high levels of service to customers and end consumers through a centralized call center and dedicated account management teams. NSD’s logistics technology provides customers with real-time visibility to shipments, access to analytical tools and seamless integration with other platforms.

Truck Brokerage. We operate one of the largest truck brokerage operations in the United States, providing customers with an over the road service option for their transportation needs. Our brokerage does not operate any trucks; instead we match customers’ needs with trucking 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.

In a typical truck brokerage transaction, the customer places an order with us for a particular freight movement. We make the delivery appointment and arrange with the appropriate carrier to pick up the freight. Once we receive confirmation that the freight has been picked up, we monitor the movement of the shipment until it reaches its destination and the delivery has been confirmed.

Dedicated. Our dedicated service line, HGD,trucking operation contracts with customers lookingwho require high service transportation using equipment dedicated 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. 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. Our dedicated service lineoperation currently operates a fleet of approximately 1,1001,200 tractors and 4,7004,600 trailers at 12552 locations throughout the United States. As of December 31, 2017, HGD2020, dedicated employed 1,294 drivers.

Truck Brokerage (Highway Services)approximately 1,300 drivers.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.

Hub and Mode LLC Networks

Hub’s entire network is interactively connected through Hub’s proprietary Network Management System and Mode LLC’s network is connected through its third party transportation management system. This enables us to arrange for the movement of freight into and out of every major city in the United States, Canada and Mexico.

In a typical intermodal transaction, the customer contacts one of Hub’s intermodal operating centers or a Mode LLC IBO to place an order. The operating center/IBO determines the price, obtains the necessary intermodal equipment, arranges for the equipment to be delivered to the customer by a drayage company and, after the freight is loaded, arranges for the transportation of the container or trailer to the rail ramp. Relevant information is entered into our system by the assigned operating center/IBO. Our predictive track and trace technology then monitors the shipment to ensure that it arrives as scheduled and alerts the customer service personnel if there are service delays. The operating center/IBO then arranges for and confirms delivery by a drayage company at the destination. After unloading, the empty equipment is made available for reloading by the operating center/IBO for the delivery market.

We provide truck brokerage services to our customers in a similar manner. In a typical truck brokerage transaction, the customer contacts one of Hub’s highway operating centers or a Mode LLC IBO to obtain a price quote for a particular freight movement. The customer then provides appropriate shipping information to the operating center/IBO. The operating center/IBO makes the delivery appointment and arranges with the appropriate carrier to pick up the freight. Once it receives confirmation that the freight has been picked up, the operating center/IBO monitors the movement of the freight until it reaches its destination and the delivery has been confirmed. If the carrier notifies us that after delivering the load it will need additional freight, we may notify other operating centers/IBOs. Although under no obligation to do so, those operating centers/IBOs may then attempt to secure additional freight for the carrier.

Marketing and Customers

As one of the world’s leading transportation management companies, Hub Group is committed to providing multi-modal solutions throughout North America, including intermodal, dedicated, truck brokerage and logistics services.  We have transformed our organization from a traditional IMC into a multi-modal solutions provider. This change has revolutionized our offerings and the way we service our customers.  We look at our customers’ entire network to provide innovative multi-modal solutions to drive savings, improve service and offer full visibility.

After 47 years in business, we continue to live by the simple mantra that "good" is not good enough. To ensure we grow and improve, we focus intently on our customers, listening to their needs, developing comprehensive transportation solutions and delivering superior service. We invest in our people, equipment and technology to maintain our competitive edge in order to be the best transportation provider for our customers.

We face a continued need to help our customers meet consumer demands of having products and services through all buying channels. We have been delivering to an already leaner supply chain, with our customers reporting an increase in speed and improved visibility. Our satellite tracking units help to ensure our customers have the capacity they need.  Our state-of-the-art technology helps to maintain our high levels of service while providing 24/7 visibility into any shipment; and our people have the skills, training and information to quickly respond to our customers' changing supply chain network. Supporting every customer is a dedicated team of

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professionals ready to service any and all of our customers' needs. We call this exceptional service approach the "One Hub" experience.

The majority of our business is in the retail, consumer products, durable goods and automotive verticals.  No one customer represented more than 10% of our total revenue in 2017 and 2016 in either reporting segment.

Information Technology Systems

Based onOur technology strategy leverages strong technology at the technology requirements forcore and emerging technologies at the edge to achieve our business strategygoals and to keep pace with changingcustomer demands. We purchase commercially available technology for commodity capabilities, we extend to create additional value leveraging emerging technologies, and customer demand, we build solutions where we can create differentiated experiences for our customers, drivers, carriers and employees. In 2018, we initiated our multi-year investment and process enhancement initiative that we refer to as “Elevate” which includes implementing core foundational technologies, Oracle enterprise resource planning (“ERP”), Oracle Human Capital Management (“HCM”) and Oracle Transportation Management (“OTM”) all of which are making investmentsdeployed in boththe cloud. Anchored on those common platforms, our back-office technology such asstrategy includes the deployment of differentiating solutions facing our ERP systemcustomers and emerging technology.  The investments to enhancecarriers through our existing technology include implementing new order management, transportation managementHub Connect application and financial management processes and systems.for our drivers through our HubPro application. In addition, we anticipate makingcontinue to implement technology solutions focused on improving internal productivity and efficiency.

The COVID-19 pandemic caused an abrupt shift in our 2020 initiatives and resulted in an urgent focus on the need to work from home.  Our previous investments in artificial intelligenceour security and automationinfrastructure facilitated the seamless execution of this transition. Key elements of the technology to further drive innovationstack that were critical included our significant investment in the Microsoft suite including O365, Teams, and efficiency throughout the organizationSecurity solutions, among others. In addition, our data and voice solutions allowed our users to support enhanced serviceour customers and our drivers seamlessly and securely from any location. Our industry leading digital solution, HubPro, was in the hands of all our drivers allowing us to continue to communicate effectively with our drivers keeping them productive while remaining safe. Our newest capability enhancement to our customers.

In 2017, we launched Hub Group Connect, our new digital platform for customers.  This product was developed using open source technology and is based on a responsive design thatHubPro mobile app allows our drivers a completely contactless experience to facilitate the handoff of critical documents.

A new product deployed during 2020 was Hub Connect: Carrier. This state-of-the-art technology solutions allows our carriers to seamlessly interact with us. This includes bidding on and booking freight, providing status updates, and streamlining the payment process.  

Our Microsoft based Application Programming Interface platform has continued to mature and now facilitates numerous transaction types. Our customers to use any type of device to connect withand vendors value our services. Hub Group Connect allows all of our customersability to interact with their order throughout its lifecycle. During 2018them through multiple technology mediums allowing solutions to be deployed quickly.

Finally, an area of focus in 2020 and continuing in 2021 is implementing automation solutions. This includes but is not limited to automating manual processes, using human augmentation solutions to allow our experienced supply chain professionals to make critical decisions while allowing our technology systems to complete commodity-orientated tasks and developing learning-based robots to drive better decision support for our operating teams.

In 2021, we will continue to provide additional featuresinvest in new technology solutions that improve service, drive operating excellence, and reduce cost.  Our focus will remain on completing transitions to Hub Group Connect which will create value for our customers.

In 2017, we also introduced our first completely mobile solution for company and owner operator drivers.  We deployed this differentiating application to drivers on tablets. The features of the application and tablet combination also allowednew technology allowing us to replace aretire significant legacy paper scanning solution usedapplications and infrastructure currently in our eco system. In addition, as we continue with our acquisition strategy, we will enable seamless end to submit order paperwork.  This application also allows a driver to find a Hub Group container based on the location information provided via our GPS technology installed on our Hub Group containers.  We will continue to deliver new technology capabilities in 2018 leveraging our cloud services for immediate deploymentend visibility to all devices.   Our Cloud First technology strategy is providing the expected benefit at the rate and pace at which we can deliver new and innovative technology solutions, while lowering the cost to serve our customers and maintain our high level of service quality.

In addition, in 2017, we implemented solutions for several new Unyson customers using Oracle Transportation Management (OTM).  These customers benefitedincluding those benefiting from our ability to create sophisticated solutions that included multi-leg order optimization and iterative consolidation as well as customer unique web-based dashboards that provide insights to supply chain efficiency and vendor compliance.  multiple Hub solutions.

Mode LLC utilizes a dynamic transportation management platform that integrates best in class third party technologies to manage its business.  This platform includes an execution system that provides multi-modal solutions, visibility to status of shipments, facilitation of customer billing, and a robust portal that allows exchange of information about loads, capacity, and event status information between transportation providers and our customers.  Additionally Mode LLC’s platform consists of components that allow for optimization of our customer’s order process, management of our diverse carrier base, and robust analytics and business intelligence solutions that allow our customers to better understand outcomes and opportunities within their supply chain.  This platform provides a robust and scalable technological solution that can meet the needs of a growing transportation network.

RelationshipRelationships with Railroads

A key element of our business strategy is to strengthen our close working relationships with the major intermodal railroads in North America. Due to our size and relative importance, some railroads have dedicated support personnel to focus on our day-to-day service requirements. On a regular basis, our senior executives and each of the railroads meet to discuss major strategic issues concerning intermodal transportation.

We have relationships with each of the following major railroads:

Transportation rates are market driven. We sometimes negotiate with the railroads or other major service providers on a route or customer specific basis. Consistent with industry practice, some of the rates we negotiate are special commodity quotations (“SCQs”), which provide discounts from published price lists based on competitive market factors and are designed by the railroads or major service providers to attract new business or to retain existing business.  SCQ rates apply to specific customers in specified shipping lanes for a specific period of time, usually up to 12 months.

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RelationshipRelationships with Drayage Companies

Hub has a “Quality Drayage Program,” under which participants commit to provide high quality drayage service along with clean and safe equipment, maintain a defined on-time performance level and follow specified procedures designed to minimize freight loss and damage. We negotiate drayage rates for transportation between specific origin and destination points.

We also provide drayage services with our own drayage operations, which we operate through our subsidiary HGT. Our drayage operations employ their own drivers and also contract with owner-operators who supply their own trucks.

RelationshipRelationships with Trucking Companies

Our truck brokerage operation hasWe contract with a large number of trucking companies that we use to transport freight. The Hub operating centers and Mode IBOs deal daily with these carriers on an operational level. Our corporate headquarters handles the administrative and regulatory aspects of the trucking company relationships. Our relationships with these trucking companies are important since these relationships determine pricing, load coverage and overall service.

Risk Management and Insurance

We require all drayage companies participating in Hub’s Quality Drayage Programof our trucking company vendors to carry general liability insurance, truckman’s auto liability insurance and cargo insurance. Railroads, which are self-insured, provide limited cargo protection. To cover freight loss or damage when a carrier’s liability cannot be established or a carrier’s insurance is insufficient to cover the claim, we carry our own cargo insurance. We also carry general liability insurance with a companion umbrella policy on this general liability insurance.

We maintain separate insurance policies to cover potential exposure from our company-owned drayage and dedicated operations. We carry commercial general liability insurance subject to a policy aggregate limit, and trucker’s automobile liability insurance with a limit per occurrence. Additionally, we have an umbrella excess liability policy and maintain motor truck cargo liability insurance.

Government RegulationRegulations

The companyCompany and several of our subsidiaries including HGD and Mode LLC, are licensed by the Department of Transportation as brokers in arranging for the transportation of general commodities by motor vehicle. To the extent that the Hub operating centers and Mode LLC IBOswe perform truck brokerage services, they do so under these licenses. The Department of Transportation prescribes qualifications for acting in this capacity, including a $75,000 surety bond that we have posted. In addition, Hub and Mode LLC each havehas customs bonds. Our trucking subsidiaries operate under Department of Transportation motor carrier authority. To date, compliance with these regulations has not had a material adverse effect on our results of operationscapital expenditures, earnings or financial condition;competitive positions; however, the transportation industry is subject to legislative or regulatory changes that can affect the economics of the industry by requiring changes in operating practices or influencing the demand for, and cost of providing, transportation services.

Custom-Trade Partnership Against Terrorism

WeOne of our operating subsidiaries achieved Custom-Trade Partnership Against Terrorism (C-TPAT) certification in 2013 and have maintained it since then. C-TPAT is a voluntary supply chain security program led by U.S.United States Customs and Border Protection focused on improving the security of private companies’ supply chains with respect to terrorism.chains. Companies who achieve C-TPAT certification must have a documented process for determining and alleviating risks throughout their international supply chain. This certification allows us to be considered low risk, resulting in expedited processing of our customers’ cargo, including fewer customs examinations.

Competition

The transportation services industry is highly competitive. We compete against intermodal providers, as well as logistics companies, third party brokers, trucking companies and railroads that market their own intermodal services. Several larger trucking companies have entered into agreements with railroads to market intermodal services nationwide. Competition is based primarily on freight rates, quality of service, reliability, transit time and scope of operations. Several transportation service companies and trucking companies, and all of the major railroads, may have substantially greater financial and other resources than we do.

GeneralHuman Capital

Employees: Hub conducts business and provides services to customers through a combination of non-driver (e.g., corporate or terminal-based) employees, driver employees, and independent contractors. As of December 31, 2017,2020, Hub Group had 4,377 employees. Hub Group had 2,030approximately 5,000 employees, excluding drivers at December 31, 2017. Hub had 1,914 employees excluding drivers and Mode LLC had 116 employees.which included approximately 3,000 drivers. We are not a party to any collective bargaining agreements and consider our relationship with our employees to be satisfactory.

AsHub’s success depends in part on our ability to attract and retain skilled staff members and drivers. Our executive management team receives regular updates regarding office and driver headcount changes, turnover rates, hiring rates, and manager training and satisfaction. We invest in our driver and non-driver employees through our Hub University learning management system, which provides access to a variety of December 31, 2017, Mode LLC had 99 IBOse-learning courses and 74 sales-only agents. Nearly allmodules to further develop job skills, increase knowledge of our business, and promote adherence to safety and compliance procedures.

Hub strives to create a culture of accountability, safety and teamwork. We set annual performance goals for our operations teams relative to collisions and injuries and track performance monthly and year-to-date to ensure accountability. Further, we provide company-wide recognition on a monthly basis for driver and non-driver employees who are nominated for performance that demonstrates our guiding principles of winning together, innovating with purpose and acting with integrity.      

Available Information

Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to reports filed pursuant to Sections 13(a) and 15(d) of the sales-only agents and IBOsSecurities Exchange Act of 1934, as amended (“Exchange Act”), are under written contractsfiled with Mode LLC.

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Other: No material portion of our operations is subject to renegotiation of profits or termination of contracts at the election of the federal government. Our business is seasonal to the extent that certain customer groups, such as retail, are seasonal.

Periodic Reports

Our annual report to the Securities and Exchange Commission (“SEC”) on Form 10-K, our quarterly. We are subject to the informational requirements of the Exchange Act and file or furnish reports, on Form 10-Qproxy statements and currentother information with the SEC.  The reports on Form 8-K, and amendments to such reports,other information that we file with the SEC are available free of charge on our website at www.hubgroup.com as soon as reasonably practicable after we electronically file or furnish such reports to the SEC.Information on our website does not constitute part of this annual report on Form 10-K. In addition, the SEC maintains a website (http://www.sec.gov) that contains our annual, quarterly, and current reports, proxy and information statements, and other information we electronically file with, or furnish to, the SEC. Any materials we file with, or furnish to, the SEC may also be read and/or copied at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. Information on the operation of the Public Reference Room maywebsites referenced in this Form 10-K is not incorporated by reference into this filing.  Further, our references to website URLs are intended to be obtained by calling the SEC at 1-800-SEC-0330.inactive textual references only.

Business Environment and Competition Risks

Because we depend on railroads for our operations, our operating results and financial condition are likely to be adversely affected by any increase in rates, reduction or deterioration in rail service or change in the railroads’ reliance on us to market their intermodal transportation services.

We depend on the major railroads in the United States for virtually all of the intermodal services we provide. In many markets, rail service is limited to one or a few railroads. Consequently, a reduction in, or elimination of, rail service to a particular market is likely to adversely affect our ability to provide intermodal transportation services to some of our customers. Rate increases would result in higher intermodal transportation costs, reducing the attractiveness of intermodal transportation compared to truck or other transportation modes, which could cause a decrease in demand for our services. Further, our ability to continue to expand our intermodal transportation business is dependent upon the railroads’ ability to increase capacity for intermodal freight and provide consistent and reliable service. Our business could also be adversely affected by a work stoppage at one or more railroads or by adverse weather conditions or other factors that hinder the railroads’ ability to provide reliable transportation services.

In the past, there have been service issues when railroads have merged. As a result, we cannot predict what effect, if any, further consolidations among railroads may have on intermodal transportation services or our results of operations.

To date, the railroads have chosen to rely on us and other intermodal competitors to market their intermodal services rather than fully developing their own marketing capabilities. If one or more of the major railroads were to decide to reducereduced their dependence on us, the volume of intermodal shipments we arrange would likely decline, which could have a material adverse effect on our results of operations and financial condition.

Our ability to expand our business or maintain our profitability may be adversely affected by a shortage of drivers and capacity.

We derive significant revenue from our intermodal, logistics, truck brokerage, and dedicated services and depend on qualified drivers to provide these services. There is significant competition for qualified drivers in the transportation industry. Additionally,

interventions and enforcements under the Federal Motor Carrier Safety Administration (“FMCSA”) Compliance, Safety, Accountability or other program may shrink the industry’s pool of drivers as those drivers with unfavorable scores may no longer be eligible to drive for us. Driver shortages and reliance on third-party companies for the operation of our intermodal, logistics, truck brokerage, and dedicated services could adversely affect our profitability and limit our ability to expand our business or retain customers. Most drayage, truckload and certain less-than-truckload companies operate relatively small fleets and have limited access to capital for fleet expansion. Particularly during periods of economic expansion, it may be difficult for our dedicated and HGT businesses, and third-party trucking companies to expand their fleets due to chronic driver shortages. Driver shortages may require us to increase drivers’ compensation that we may be unable to pass on to our customers, let trucks sit idle, or face difficulty meeting customer demands, all of which could adversely affect our growth and profitability.

Insurance and claims expenses could significantly reduce our earnings.

We are exposed to claims related to cargo loss and damage, property damage, personal injury, workers’ compensation, group health and group dental. We maintain insurance coverage with third-party insurance carriers, but we assume a significant portion of the risk associated with these claims due to high self-insured retention (“SIR”) and deductibles. Our operating results could be adversely affected if any of the following were to occur: (i) the number or the severity of claims increases; (ii) we are required to accrue or pay additional amounts because claims prove to be more severe than our original assessment; or (iii) claims exceed our coverage amounts. If the number or severity of claims increases, our operating results could also be adversely affected if the cost to renew our insurance was increased when our current coverage expires. If these expenses increase, and we are unable to offset the increase with higher freight rates to our customers, our earnings could be materially and adversely affected. In addition, insurance companies generally require us to collateralize our SIR or deductible levels. If these collateralization requirements increase, our borrowing capacity could be adversely affected.

We operate in a highly competitive industry and our business may suffer if we are unable to adequately address potential downward pricing pressures and other competitive factors.

The transportation industry is highly competitive. We face competition in all geographic markets and each industry sector in which we operate. Increased competition or our inability to compete successfully may lead to a reduction in our volume, reduced revenues, reduced profit margins, increased pricing pressure, or a loss of market share, any one of which could affect our financial results. Numerous competitive factors could impair our ability to maintain our current profitability, including the following:

Our customers’ and suppliers’ businesses may be negatively affected by various economic and other factors such as recessions, downturns in the economy, global uncertainty and instability, the effects or perceived effects of pandemics, changes in United States social, political, and regulatory conditions and/or a disruption of financial markets, which may decrease demand for our services or increase our costs.

Adverse economic and other conditions, both in the United States and internationally, can negatively affect our customers’ business levels, the amount of transportation services they need, their ability to pay for our services and overall freight levels, any of which might impair our asset utilization and profitability. For example, the effects (or perceived effects) of pandemics (including

matters such as the coronavirus) may affect international trade, supply chains, travel, employee productivity and other economic activities.  Additionally, uncertainty and instability in the global economy and any other action that the governments may take to withdraw from or materially modify international trade arrangements, including related to the United States-Mexico-Canada Agreement (“USMCA”), which was agreed upon on September 30, 2018 and is designed to replace the North American Free Trade Agreement (“NAFTA”), may lead to fewer goods being transported and could have a material adverse effect on our business, financial conditions and results of operations. The United States government has made significant changes in United States trade policy and has taken certain other actions that may impact United States trade, including imposing tariffs on certain goods imported into the United States. To date, several governments, including the European Union, China, and India, have imposed tariffs on certain goods imported from the United States. Any further changes in United States or international trade policy could trigger additional retaliatory actions by affected countries, resulting in “trade wars” and increased costs for goods transported globally, which may reduce customer demand for these products if the parties having to pay those tariffs increase their prices, or in trading partners limiting their trade with countries that impose anti-trade measures. If these consequences are realized, the volume of global economic activity may be significantly reduced. Such a reduction could have a material adverse effect on our business, results of operations and financial condition.

Customers adversely affected by changes in United States trade policies or otherwise encountering adverse economic or other conditions may be unable to obtain additional financing or financing under acceptable terms. These customers represent a greater potential for bad debt losses, which may require us to increase our reserve for bad debt. Economic conditions resulting in bankruptcies of one or more of our large customers could have a significant impact on our financial position, results of operations or liquidity in a particular year or quarter. Further, when adverse economic times arise, customers may select competitors that offer lower rates in an attempt to lower their costs, and we might be forced to lower our rates or lose freight volumes.

Our suppliers’ business levels also may be negatively affected by adverse economic and other conditions and changes in the political and regulatory environment, as well as the effects (or perceived effects) of pandemics and other public concerns, both in the United States and internationally, or financial constraints, any one of which could lead to disruptions in the supply and availability of equipment, parts and services critical to our operations. A significant interruption in our normal supply chain could disrupt our operations, increase our costs and negatively impact our ability to serve our customers.

We are also subject to cost increases outside of our control that could materially reduce our profitability if we are unable to increase our rates sufficiently. Such cost increases include, but are not limited to, increases in wage rates, fuel prices, interest rates, taxes, tolls, license and registration fees, insurance, revenue equipment and healthcare for our employees.

Because our business is concentrated in intermodal services, any decrease in demand for intermodal transportation services compared to other transportation services could have an adverse effect on our results of operations.

We derived 60% of our revenue from our intermodal services in 2020, 59% in 2019 and 60% in 2018. As a result, any decrease in demand for intermodal transportation services compared to other transportation services could have a material adverse effect on our results of operations.

Our business could be adversely affected by strikes or work stoppages by truck drivers, warehouse employees, port employees and railroad employees, or the decision of our employees to unionize.

There may be labor unrest, including strikes and work stoppages, among workers at various transportation providers and in industries affecting the transportation industry, such as warehousing and ports. We could lose business due to any significant work stoppage or slowdown and, if labor unrest results in increased rates for transportation providers, we may not be able to pass these cost increases on to our customers. Strikes among longshoremen and clerical workers at ports in recent years have resulted in reduced activity at the ports for a time, creating an impact on the transportation industry. Work stoppages occurring among owner-operators in a specific market have increased our operating costs periodically in the past. In recent years, there have been strikes involving railroad workers. Future strikes by railroad employees in the United States, Canada or anywhere else that our customers’ freight travels by railroad would impact our operations. Any significant work stoppage, slowdown or other disruption involving port employees, railroad employees, warehouse employees or truck drivers could adversely affect our business and results of operations.

Currently, none of our employees are represented by a collective bargaining agreement. If in the future our employees decide to unionize, this would increase our operating costs and force us to alter the way we operate causing an adverse effect on our operating results.

We derive a significant portion of our revenue from our largest customers and the loss of one or more of these customers could have a material adverse effect on our revenue and business.

Our 10 largest customers accounted for approximately 46% of our total revenue in 2020, 42% in 2019 and 41% in 2018. While our dedicated and logistics businesses may involve long-term contracts, those contracts may contain cancellation clauses, and there is no assurance that our current customers will continue to utilize our services or continue at the same levels. A reduction in or

termination of our services by one or more of our largest customers could have a material adverse effect on our revenue and business. While we continue to focus our efforts on diversifying our customer base, we may not be successful in doing so.

Relatively small increases in our transportation costs that we are unable to pass through to our customers are likely to have a significant effect on our gross margin and operating income.

Transportation costs represented 88% of our consolidated revenue in 2020, 86% in 2019 and 88% in 2018. Because transportation costs represent such a significant portion of our costs, any increases in the operating costs of railroads, warehouse vendors, and other transportation providers can be expected to result in higher freight rates. Transportation costs may increase if we are unable to sign on owner-operators or recruit employee drivers as this may increase driver costs or force us to use more expensive purchased transportation. The inability to pass cost increases to our customers is likely to have a significant effect on our gross margin and operating income.  

Our operations may be affected by external factors such as severe weather and other natural occurrences, including floods, fires, hurricanes and earthquakes at operating locations where we have vehicles, warehouses and other facilities. As a result, our vehicles and facilities may be damaged, our workforce may be unavailable, fuel costs may rise, and significant business interruptions could occur. In addition, the performance of our vehicles could be adversely affected by extreme weather conditions. Insurance to protect against loss of business and other related consequences resulting from these natural occurrences is subject to coverage limitations, depending on the nature of the risk insured. This insurance may not be sufficient to cover all of our damages or damages to others and this insurance may not continue to be available at commercially reasonable rates. Even with insurance, if any natural occurrence leads to a catastrophic interruption of service, we may not be able to mitigate a significant interruption in operations.

Our business depends on the availability of fuel. Fuel availability can be affected by natural or man-made disasters, adverse weather conditions, political events, disruption or failure of technology or information systems, price and supply decisions by oil producing countries and cartels, terrorist activities, armed conflict and world supply and demand imbalance. We do not maintain fuel storage and pumping stations at all of our facilities. Therefore, a disruption in the global fuel supply resulting from factors outside of our control, hence increasing the demand for fuel traditionally used by trucks could have a material adverse effect on our business, results of operations, financial condition and cash flows.

Additionally, fuel costs can be very volatile. Over recent years, fuel prices have fluctuated greatly due to factors outside our control. Significant increase in fuel prices or fuel taxes that were unable to offset by any fuel surcharges or freight rate increases could have an adverse impact on our business operations. We have a fuel surcharge program in place with many of our customers. These fuel surcharges typically allow us the ability to recover the costs associated with the volatile fuel prices. Our inability to time the fuel surcharges billed to customers with the change in fuel costs could affect our operations. Rapid increases in fuel costs could also have a material adverse effect on our operations or future profitability.

Our failure to implement or market new and existing services to existing and potential customers could have an adverse effect on our operations.

We expect to continue expanding our service offerings. In the event we implement new service offerings, we may devote substantial resources to educating our employees and customers on such offerings with no assurance that a sufficient number of customers will use such additional services. If we add new services, we may not identify trends correctly or may not be able to bring new services as quickly, effectively or price-competitively as our competitors. Our failure to implement new services or market any existing or future services to our current customer base and/or new customers could have a material adverse impact on our operations and profitability.

We are partially self-insured for certain losses related to employee medical coverage, vehicle liability and workers’ compensation claims. We may fail to establish sufficient insurance reserves and adequately estimate for medical claims, future workers’ compensation and vehicle liabilities.

We are partially self-insured for certain losses related to employee medical coverage, excluding employees covered by health maintenance organizations. We generally have an individual stop loss deductible per enrollee unless specific exposures are separately insured. We accrue a contingent liability based upon examination of historical trends, historical actuarial analysis, our claims experience, total plan enrollment (including employee contributions), population demographics, and other various estimates. Self-insurance reserves, net income, and cash flows could be materially affected if future claims differ significantly from our historical trends and assumptions.

We are partially self-insured for vehicle liability and workers’ compensation claims. Our self-insurance accruals are based on actuarially estimated, undiscounted cost of claims, which includes claims incurred but not reported. While we believe that our estimation processes are well designed and comply with generally accepted accounting principles and other accounting and finance best practices, any projection of losses concerning workers’ compensation and vehicle liability is subject to a considerable degree of

variability. The causes of this variability include litigation trends, claim settlement patterns and fluctuations in the frequency or severity of accidents. If actual losses incurred are greater than those anticipated, our self-insurance reserves may be insufficient and additional costs could be recorded in our consolidated financial statements. If we suffer a substantial loss in excess of our self-insured limits, the loss and attendant expenses may be covered by traditional insurance and excess insurance the Company has in place, but if not covered or above such coverages, losses could harm our business, financial condition or results of operations.

The COVID-19 pandemic has disrupted and has and could materially and adversely affect our business, financial condition and results of operations, and the ultimate impacts of the pandemic on our business, financial condition and results of operations will depend on future developments and other factors that are highly uncertain and will be affected by the scope and duration of the pandemic and actions taken by individuals and governmental authorities in response to the pandemic.

The ongoing COVID-19 pandemic has caused and will continue to cause significant disruption in the international and United States economies and financial markets and has had and may continue to have a significant effect on our business, financial condition and results of operations. The spread of COVID-19 has caused illness, quarantines, cancellation of events and travel, business and school shutdowns, reduction in business activity and financial transactions, supply chain interruptions and overall economic and financial market instability. In response to the COVID-19 pandemic, the governments of most states have taken preventative or protective actions, such as imposing restrictions on travel and business operations, advising or requiring individuals to limit or forego their time outside of their homes, and ordering temporary closures of businesses that have been deemed to be non-essential.

The ultimate duration of the pandemic and of responsive governmental regulations, including shelter-in-place orders and mandated business closures, is uncertain. New and changing government and private actions to address the COVID-19 pandemic have been occurring regularly. We have been closely monitoring the COVID-19 pandemic and its impacts and potential impacts on our business. These restrictions and other consequences of the pandemic, however, have resulted in significant adverse effects for many different types of businesses, including, among others, those in the retail, travel, hospitality and food and beverage industries, and have resulted in a significant number of layoffs and furloughs of employees nationwide and in the regions in which we operate.

We have been deemed an essential business and have been permitted to continue to operate in all of the jurisdictions in which we operate, including jurisdictions that have mandated the closure of certain businesses, and we expect to be permitted to continue to operate in the future. Nevertheless, there is no assurance that we will continue to be permitted to operate under every future government order or other restriction and in every location.

In addition, the COVID-19 pandemic has caused, and may in the future continue to cause, disruptions, and in some cases severe disruptions, to the business and operations of our customers as a result of quarantines, worker absenteeism as a result of illness or other factors, social distancing measures, consumer concerns, and other travel, health-related, business or other restrictions. Certain of our customers have been, and may in the future be, required to close or operate at a lower capacity. There can be no assurance that any decrease in revenues resulting from the COVID-19 pandemic will be offset by increased revenues in the future. The ultimate effects of the COVID-19 pandemic on the broader economy and the markets that we serve are not known nor is the ultimate length of the restrictions described above and any accompanying effects.

The further spread of the COVID-19 outbreak, as well as ongoing or new governmental, regulatory and private sector responses to the pandemic, may materially disrupt banking and other economic activity generally and in the areas in which we operate. This could result in further decline in demand for our services, and could negatively affect, among other things, our liquidity, regulatory capital and our growth strategy. Any one or more of these developments could have a material adverse effect on our business, financial condition and results of operations.

Although we are taking precautions to protect the safety and well-being of our team members and customers, no assurance can be given that the steps being taken will be adequate or deemed to be appropriate, nor can we predict the level of disruption which will occur to our team members’ ability to provide customer support and service. If we are unable to recover from a business disruption on a timely basis, our business, financial condition and results of operations could be materially and adversely affected. We may also incur additional costs to remedy damages caused by such disruptions, which could further adversely affect our business, financial condition and results of operations.

Technology and Cybersecurity Risks

If we fail to maintain and enhance our information technology systems, or if we fail to successfully implement new technology or enhancements, we may be at a competitive disadvantage and lose customers.

Hub Group continues to see technology as key to driving internal efficiencies as well as providing additional capabilities to customers and carriers. In addition, Hub Group’s systems are critical to our operations and our ability to compete effectively as an intermodal provider, dedicated and drayage carrier, truck broker and logistics provider. We expect our customers to continue to demand more sophisticated technology-driven solutions from their suppliers and we must enhance or replace our information technology systems in response. This may involve significant research and development costs, implementation costs and potential challenges. To keep pace with changing technologies and customer demand, we are making investments in our technology, as well as investing in emerging technology to further drive innovation and efficiency. The back-office investments include implementing new order management, transportation management, contract management and financial management processes and systems.  In a transformation of this size and scope we must mitigate risk by engaging external expertise and hiring internal experts. If we fail to successfully implement critical technology, if it does not provide the anticipated benefits or it does not meet market demands, we may be placed at a competitive disadvantage and could lose customers, materially adversely impacting our financial condition and results of operations. 

Technology and new market entrants may also disrupt the way we and our competitors operate. As technology improves and new companies enter the freight brokerage market, our customers may be able to find alternatives to our services for matching shipments with available freight hauling capacity. We must continue to develop innovative emerging technologies to source, track and provide visibility to capacity while exploiting machine learning and artificial intelligence to further improve customer outcomes.

If we fail to successfully implement critical technology, if it does not provide the anticipated benefits or it does not meet market demands, we may be placed at a competitive disadvantage and could lose customers, materially adversely impacting our financial condition and results of operations. 

Our information technology systems are subject to breaches in data security and other risks andalso depend upon the inability to use our information technology systems could materially adversely affect our business.

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Our information technology systems are dependent uponInternet, third-party service providers, global communications providers, satellite-based communications systems, the electric utilities grid, electric utility providers and cloud servicetelecommunications providers as well as their respective vendors, all of whom have at some point experienced significant system failures and outages in the past. These providers’past. We have minimal control over the operation, quality, or maintenance of these services or whether vendors will improve their services or continue to provide services that are essential to our business. Disruptions due to transitional challenges in upgrading or enhancing our technology systems; failures in the services upon which our information technology platforms rely, including those that may arise from adverse weather conditions or natural calamities, such as floods, hurricanes, earthquakes or tornadoes; illegal acts, including terrorist attacks; human error or systems are susceptible to outages from fire, floods, power loss, telecommunications failures, break-ins and similar events. Our infrastructure may also be vulnerable to computer viruses, malicious intrusion, random attacks and similar disruptions from unauthorized tampering with our computer systems. Failure to prevent or mitigate data loss or system intrusions from cyber-attacks modernization initiatives; and/or other security breaches, system failures or outages could expose us, our vendors, customers or third parties to a risk of loss or misuse of such information, whichdisruptions, may adversely affect our operating results, result in litigationbusiness, which could increase our costs or otherwise harm our reputation or business.  Likewise, data privacy breaches by employees and others who access our systems may pose a risk that sensitive customer, vendor or employee data may be exposed to unauthorized persons or to the public, materially adversely impacting our customer service, employee, customer and vendor relationships and our reputation.  

The Company is continuously working to install new, and upgrade its existing, information technology systems and provide employee awareness training around phishing, malware, and other cyber risks to ensure that the Company is protected against cyber risks and security breaches. While we believe that we have taken appropriate security measures to protect our data and information technology systems and prevent data loss, there can be no assurance that our efforts may not prevent breakdowns or breaches in our systems that could result in a loss of customers or a reduction in demand for our services, or otherwise have a material adverse effect on our business.

We derive a significant portion of our revenue from our largest customers and the loss of one or more of these customersthat could have a material adverse effect on our revenueresults of operations and business.financial position.

Our 20 largest customers accounted for approximately 39%information technology systems are subject to cyber and other risks some of which are beyond our total revenue in 2017, 38% in 2016 and 35% in 2015. While our dedicated and logistics businesses may involve long-term contracts, those contracts may contain cancellation clauses, and there is no assurance that our current customers will continue to utilize our services or continue at the same levels.  A reduction in or termination of our services by one or more of our largest customerscontrol, which could have a material adverse effect on our revenuebusiness, results of operations and business.financial position.

We rely heavily on the proper functioning and availability of our information systems for our operations as well as for providing value-added services to our customers. Our information systems, including our accounting, communications and data processing systems, are integral to the efficient operation of our business. It is critical that the data processed by these systems remain confidential, as it often includes competitive customer information, confidential customer credit card and transaction data, employee records and key financial and operational results and statistics. The sophistication of efforts by hackers, foreign governments, cyber-terrorists, and cyber-criminals, acting individually or in coordinated groups, to launch distributed denial of service attacks or other coordinated attacks that may cause service outages, gain inappropriate or block legitimate access to systems or information, or result in other business interruptions has continued to increase in recent years. We utilize third-party service providers who have access to our systems and certain sensitive data, which exposes us to additional security risks, particularly given the complex and evolving laws and regulations regarding privacy and data protection. While we and our third-party service providers have experienced cyber-attacks and attempted breaches of our and their information technology systems and networks or similar events from time to time, no such incidents have been, individually or in the aggregate, material to us. Cyber incidents that impact the security, availability, reliability, speed, accuracy or other proper functioning of our systems, information and measures, including outages, computer viruses, break-ins and similar disruptions, could have a significant impact on our operations.

Although our information systems are protected through physical and software safeguards, as well as redundant systems, network security measures and backup systems, it is difficult to fully protect against the possibility of power loss, telecommunications failures, cyber attacks, and other cyber incidents in every potential circumstance that may arise. A significant cyber incident, including system failure, security breach, disruption by malware or ransomware, or other damage, could interrupt or delay our operations, damage our reputation and brand, cause a loss of customers, expose us to a risk of loss or litigation, result in regulatory scrutiny, investigations, actions, fines or penalties and/or cause us to incur significant time and expense to remedy such an event, any of which could have a material adverse impact on our results of operations and financial position. Furthermore, any failure to comply with data privacy, security or other laws and regulations could result in claims, legal or regulatory proceedings, inquiries or investigations. As cyber threats are continually evolving, our controls and procedures may become inadequate and we may be required to devote additional resources to modifying or enhancing our systems in the future. In addition, our insurance intended to address costs associated with aspects of cyber incidents, network failures and data privacy-related concerns, may not sufficiently cover all types of losses or claims that may arise.

The inability to successfully implement our new enterprise resource planning system could materially adversely affect our business.

We are engaged in a multi-year implementation of a new enterprise resource planning system (“ERP”). The ERP is designed to efficiently maintain our books and records and provide information important to the operation of our business to our management team. The ERP will continue to require significant investment of human and financial resources. In implementing the ERP, we may experience significant delays, increased costs and other difficulties. Any significant disruption or deficiency in the design and implementation of the ERP could adversely affect our ability to expandprocess orders, service customers, send invoices and track payments, fulfill contractual obligations, meet financial reporting obligations or otherwise operate our business.

Operational Risks

We depend on third parties for equipment and services essential to operate our business, or maintain our profitability may be adversely affected by a shortage of drivers and capacity.if we fail to secure sufficient equipment and services, we could lose customers and revenue.

We derive significant revenue from our truck brokerage, dedicateddepend on third parties for transportation equipment, such as tractors, containers, chassis, and logistics services. Driver shortagestrailers and reliance on third-party companiescertain services such as warehousing and cross docks necessary for the operation of our business. Our industry has experienced equipment and warehouse capacity shortages in the past, particularly during the peak shipping season in the fall. A substantial amount of intermodal truck brokerage, dedicatedfreight originates at or near the major West Coast ports, which have historically had the most severe equipment shortages. As an asset-light freight transportation management company, if we cannot secure sufficient transportation equipment and logisticswarehouse services at a reasonable price from third parties to meet our customers’ needs, our customers may seek to have their transportation and warehousing needs met by other providers with their own assets. This could have a material adverse effect on our business, results of operations and financial position.

The ability to hire or retain management and other key personnel is critical to our continued success, and the loss of or inability to hire such personnel could have a material adverse effect on our business, financial condition and results of operations.

There is substantial competition for qualified personnel in the transportation services industry. Many individuals in the industry are required to sign non-competition agreements, severely limiting our ability to hire qualified personnel to compete in the market-place. As all key personnel devote their full time to our business, the loss of any member of our management team, or other key persons, or the inability to hire key persons, could have an adverse effect on us. We do not have written employment agreements with any of our executive officers and do not maintain key man insurance on any of our executive officers, although we do have non-competition agreements with most of them. If we lose key members of our senior management team or are unable to effect successful transitions from one executive to another as part of our succession plan, we may not be able to effectively manage our current operations or meet ongoing and future business challenges, and this could have a material adverse effect on our business, financial condition and results of operations.

Our growth could be adversely affected if we are not able to pursue our acquisition strategy or to successfully integrate acquired businesses.

We cannot guarantee that we will be able to execute and integrate acquisitions on commercially acceptable terms. Furthermore, the failure to integrate an acquired business or assets could significantly impact our financial results. Although we believe we have adequate liquidity and capital resources to fund our operations internally, our inability to access the capital markets on favorable terms, or at all, to obtain adequate financing from debt or capital sources could adversely affect our profitability and limit our ability to expandpursue growth through acquisitions. Financial results most likely to be negatively affected include, but are not limited to, revenue, gross margin, salaries and benefits, selling general and administrative expenses, depreciation and amortization, interest expense, net income and our business or retain customers. Most drayage and certain less than truckload companies operate relatively small fleets and have limited access to capital for fleet expansion. Particularly during periods of economic expansion, it may be difficult for HGD, HGT and third-party trucking companies to expand their fleets due to chronic driver shortages. Driver shortages may require increases to drivers’ compensation that we may be unable to pass on to our customers, thereby increasing our cost of providing services.  Truckload capacity could be tighter as a result of the ELD mandate that was effective in December 2017.  debt level.

Our obligation to pay our carriers is not contingent upon receipt of payment from our clients and we extend credit to certain clients as part of our business model.

In most cases, we take full risk of credit loss for the transportation services we procure from carriers.  Our obligation to pay our carriers is not contingent upon receipt of payment from our clients. If any of our key clients fail to pay for our services, our profitability would be negatively impacted.

Because our business is concentrated on intermodal services, any decrease in demand for intermodal transportation services compared to other transportation services could have an adverse effect on our results of operations.

We derived 57%Our residential last mile delivery service entails certain risks that differ from those of our revenuehistorical business operations.

With our acquisition of NSD we offer residential last mile delivery services to our customers. This service offering entails certain risks that differ from our intermodalhistorical business operations.  While we do not operate any equipment or employ any drivers that are used in the provision of such services, in 2017, 61% in 2016our vendors’ trucks and 62% in 2015. As a result, any decrease in demand for intermodal transportation services compared to other transportation services could have a material adverse effect on our results of operations.

Wedrivers operate in a highly competitive industry and our business may suffer if we are unableresidential environments that expose such vendors (and potentially us) to adequately address potential downward pricing pressuresthe risk of property damage, personal injury and other competitive factors.claims including from operating on residential streets and from entering into end-consumers’ homes.

Legal, Regulatory and Compliance Risks

There are numerous competitive factors which could impair our ability to maintain our current profitability. We compete with many other transportation and logistics service providers, some of which have greater capital resources than we do. Some of our competitors periodically reduce their prices to gain business, and some of our competitors may have lower cost structures than we do, which may limit our ability to maintain or increase prices to preserve market share. Additionally, our customers may decide to in-source the services we currently provide for them using their own assets.

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An economic downturn and cyclical fluctuations in the economy could materially adversely affect our business.

Our operations and performance depend significantly on economic conditions. Uncertainty about United States and global economic conditions poses a risk as consumers and businesses may postpone spending in response to tighter credit, negative financial news and/or declines in income or asset values, which could have a material negative effect on demand for transportation services. We are unable to predict the likely duration and severity of disruptions in the financial markets and adverse economic conditions, and our business and results of operations could be materially and adversely affected. Other factors that could influence demand include fluctuations in fuel costs, labor costs, consumer confidence, and other macroeconomic factors affecting consumer spending behavior. We have little or no control over any of these factors or their effects on the transportation industry.  Economic recession or a downturn in customers’ business cycles also may have an adverse effect on our results of operations and growth by reducing demand for our services.  Therefore, our results of operations, like the entire freight transportation industry, are cyclical and subject to significant period-to-period fluctuations.  There could be a number of follow-on effects from a credit crisis on our business, including the insolvency of key transportation providers and the inability of our customers to obtain credit to finance development and/or manufacture products resulting in a decreased demand for transportation services. Our revenues and gross margins are dependent upon this demand, and if demand for transportation services declines, our revenues and gross margins could be adversely affected.

Although we believe we have adequate liquidity and capital resources to fund our operations internally, our inability to access the capital markets on favorable terms, or at all, may adversely affect our ability to engage in strategic transactions. The inability to obtain adequate financing from debt or capital sources could force us to self-fund strategic initiatives or even forgo certain opportunities, which in turn could potentially harm our performance.

Uncertainty about global economic conditions could also increase the volatility of our stock price.

We use a significant number of independent contractors, such as owner operators, in our businesses.  Legislative, judicial and regulatory authorities may continue to take actions or render decisions that could affect the independent contractor classification, which could have a significant impact on our gross margin and operating income.

We do business with a large number of independent contractors, such as Mode LLC IBO’s and sales agents and HGT owner-operators, consistent with longstanding industry practices. Legislative, judicial, and regulatory (including tax) authorities have taken actions and rendered decisions that could affect the independent contractor classifications.  Class action and individual lawsuits have been filed against us and others in our industries,industry, challenging the independent contractor classifications.  See Item 3 - Legal Proceedings for further discussion and see Note 1416 to the consolidated financial statements under “Legal Matters” for a description of material pending litigation and regulatory matters affecting us and certain risks to our business presented by such matters. If independent contractors are determined to be employees, or the Company a joint employer of warehousemen used for our consolidation or last mile delivery business, then we may incur legal liabilities associated with that determination, such as liability for unpaid wages, overtime, employee health insurance and taxes.  If we were to change how we treat independent contractors or reclassify independent contractors to employees, then we would likely incur expenses associated with that reclassification and could incur additional ongoing expenses. The costs associated with these matters could have a material adverse effect on results of operations and our financial position.

Relatively small increasesWe operate in our transportation costs that we are unable to pass through to our customers are likely to have a significant effect on our gross marginhighly regulated industry, and operating income.

Transportation costs represented 89% of our consolidated revenuechanges in 2017, 87% in 2016 and 88% in 2015. Because transportation costs represent such a significant portion of our costs, any increases in the operatingexisting regulations or costs of railroads, trucking companiescompliance with, or drayage companies can be expected to result in higher freight rates.  Transportation costs may increase if we are unable to sign on owner-operatorsliability for violation of, existing or recruit employee drivers as this may increase driver costsfuture regulations or force us to use more expensive purchased transportation.  The inability to pass cost increases to our customers is likely to have a significant effect on our gross margin and operating income.  

Insurance and claims expenses could significantly reduce our earnings.

We maintain insurance with licensed insurance companies.  Our future insurance and claims expenses might exceed historical levels, which could reduce our earnings. If the number or severity of claims increases, our operating results could be adversely affected and the cost to renew our insurance could increase when our current coverage expires. If these expenses increase, and we are unable to offset the increase with higher freight rates to our customers, our earnings could be materially and adversely affected.

We are partially self-insured for certain losses related to employee medical coverage. Our self-insurance reserves may not be adequate to cover our medical claim liabilities.

We are partially self-insured for certain losses related to employee medical coverage, excluding employees covered by health maintenance organizations. We generally have an individual stop loss deductible per enrollee unless specific exposures are separately insured. We accrue a contingent liability based upon examination of historical trends, historical actuarial analysis, our

8

claims experience, total plan enrollment (including employee contributions), population demographics, and other various estimates. Self-insurance reserves, net income, and cash flows could be materially affected if future claims differ significantly from our historical trends and assumptions.

We depend on third parties for equipment essential to operate our business, and if we fail to secure sufficient equipment, we could lose customers and revenue.

We depend on third parties for transportation equipment, such as tractors, containers, chassis, trailers and cross docks necessary for the operation of our business. Our industry has experienced equipment shortages in the past, particularly during the peak shipping season in the fall. A substantial amount of intermodal freight originates at or near the major West Coast ports, which have historically had the most severe equipment shortages. As an asset-light freight transportation management company, if we cannot secure sufficient transportation equipment at a reasonable price from third parties to meet our customers’ needs, our customers may seek to have their transportation needs met by other providers with their own assets. Thisantiterrorism measures could have a material adverse effect on our business, results of operations and financial position.business.

Losing a member of our management team or one or more key Mode LLC sales only agents or IBOs could have an adverse effect on revenue and net income.

There is substantial competition for qualified personnel in the transportation services industry. As all key personnel devote their full time to our business, the loss of any member of our management team, key Mode LLC sales only agents or IBOs or other key persons could have an adverse effect on us. We do not have written employment agreements with any of our executive officers and do not maintain key man insurance on any of our executive officers. Nearly all Mode LLC sales-only agents and IBOs are under written contract with Mode LLC.  Mode’s success depends upon attracting and retaining the services of Mode LLC sales-only agents and IBOs, as well as our ability to attract and retain a sufficient number of other qualified personnel to run our business. Certain Mode LLC IBOs and sales-only agents represent a large portion of Mode’s overall revenues. If one or more large IBOs or sales-only agents were to terminate their relationship with Mode LLC, there could be an adverse effect on Mode’s business and results of operations.

Our growth could be adversely affected if we are not able to identify, successfully acquire and integrate acquisition prospects.

We believe that future acquisitions, the failure to make such acquisitions or the failure to integrate such acquired business could significantly impact financial results.  We cannot guarantee that we will be able to identify suitable acquisitions or execute acquisitions on commercially acceptable terms.  Financial results most likely to be impacted include, but are not limited to, revenue, gross margin, salaries and benefits, selling general and administrative expenses, depreciation and amortization, interest expense, net income and our debt level.

Our business could be adversely affected by strikes or work stoppages by draymen, truckers, port workers and railroad workers.

There may be labor unrest, including strikes and work stoppages, among workers at various transportation providers and in industries affecting the transportation industry, such as port workers. We could lose business due to any significant work stoppage or slowdown and, if labor unrest results in increased rates for transportation providers such as draymen, we may not be able to pass these cost increases on to our customers. Strikes among longshoreman and clerical workers at ports in the past few years have slowed down the ports for a time, creating a major impact on the transportation industry.  Work stoppages occurring among owner-operators in a specific market have increased our operating costs periodically in the past. In the past several years, there have been strikes involving railroad workers. Future strikes by railroad workers in the United States, Canada or anywhere else that our customers’ freight travels by railroad would impact our operations. Any significant work stoppage, slowdown or other disruption involving port workers, railroad workers, truckers or draymen could adversely affect our business and results of operations.

The transportation industry is subject to government regulation, and regulatory changes could have a material adverse effect on our operating results or financial condition.

The Company and various subsidiaries, including HGDHGT, NSD, Estenson Logistics, LLC (“Estenson”) and Mode LLC,CaseStack, are licensedregulated by the Department of Transportation (“DOT”) as motor carriercarriers and/or freight brokers. The DOT prescribes qualifications for acting in this capacity,these capacities, including surety bond requirements. Our HGT and HGD subsidiaries are licensed by the DOT to act as motor carriers. The transportation industry is subject to DOT regulations regarding, among other things, driver breaks and “restart” rules and the use of Electronic Logging Devices (“ELD’s”) that can affect the economics of the industry by requiring changes in operating practices or influencing the demand for, and cost of providing, transportation services. The FMCSA, under the DOT, also manages a compliance and enforcement initiative partnering with state agencies designed to monitor and improve commercial vehicle motor safety. We are audited periodically by the DOT to ensure that we are in compliance with various safety, hours-of-service, and other rules and regulations. If we were found to be out of compliance, the DOT could levy fines and restrict or otherwise impact our operations. To date, compliance with these regulations has not had a material adverse effect on our results of operations or financial condition. We may also become subject to new or more restrictive regulations relating to carbon emissions under climate change legislation or limits on vehicle weight and size. Future laws and regulations may be more stringent and require changes in

9

operating practices, influence the demand for transportation services or increase the cost of providing transportation services, any of which could materially adversely affect our business and results of operations.

We are not able to accurately predict how new governmental laws and regulations, or changes to existing laws and regulations, will affect the transportation industry generally, or us in particular. We are also unable to predict how the change in administration will affect government regulation of the transportation industry. Although government regulation that affects us and our competitors may simply result inIf we incur higher costs as a result of any new regulations and are unable to pass along such costs to our customers, our business may be adversely affected.

Our failure to comply with any existing or future laws, rules or regulations to which we are, or may become subject, whether actual or alleged, could have a material adverse effect on our business and on our ability to access the capital required to operate our business. Among other things, any such failure could expose us to reputational harm, loss of business, fines, penalties or potential litigation liabilities, including costs, settlements and judgments, as well as the loss of operating authority and restrictions on our operations.

Furthermore, terrorist attacks, along with any government response to those attacks, may adversely affect our financial condition, results of operations or liquidity. Our fleet, other key infrastructure and information technology systems may be targets or indirect casualties of acts of terror, other harmful acts, or war. Further, because transportation assets continue to be a target of terrorist activities, federal, state and local governmental bodies are proposing and, in some cases, have adopted legislation and regulations relating to security issues that canimpact the transportation industry, including checkpoints and travel restrictions on large trucks. If additional security measures disrupt or impede the timing of our operations, we may fail to meet the requirements of our customers or incur increased expenses to do so. In addition, complying with these or future regulations could continue to increase our operating costs and reduce operating efficiencies. We maintain insurance coverages addressing these risks; however, such insurance may be passed along to customers, thatinadequate or become unavailable, premiums charged for some or all of the insurance could increase dramatically, or regulations may not bechange. These changes could exacerbate the case.effects of an act of terrorism on our business, resulting in a significant business interruption, increased costs and liabilities and decreased revenues or an adverse impact on results of operation.

Our operations may be subject to various environmental laws and regulations, the violation of which could result in substantial fines or penalties.

We are subject to various federal, state and local governmental laws and regulations that govern, among other things, the emission and discharge of hazardous materials into the environment, the presence of hazardous materials at our properties or in our vehicles, fuel storage tanks, the transportation of certain materials and the discharge or retention of storm water. Under certain environmental laws, we could also be held responsible for any costs relating to contamination at our past or present facilities and at third-party waste disposal sites, as well as costs associated with the clean-up of accidents involving our vehicles. Environmental laws have become and may continue to be increasingly more stringent over time, and there can be no assurance that our costs of complying with current or future environmental laws or liabilities arising under such laws will not have a material adverse effect on our business, operations or financial condition.

From time to time, we arrange for the movement of hazardous materials at the request of our customers. As a result, we may be subject to various environmental laws and regulations relating to the handling of hazardous materials. If we are involved in a spill or other accident involving hazardous materials, or if we are found to be in violation of applicable laws or regulations, we could be subject to substantial fines or penalties and to civil and criminal liability, any of which could have an adverse effect on our business and results of operations.

The Company is also subject to certain Environmental Protection Agency (“EPA”) and California Air Resources Board (“CARB”) regulations. We may become subject to enforcement actions, new or more restrictive regulations, or differing interpretations of existing regulations, which may increase the cost of providing transportation services or adversely affect our results of operations.  

Any attempt byIn addition to EPA and state agency regulations on exhaust emissions with which we must comply, there is an increased legislative and regulatory focus on climate change, greenhouse gas emissions and the current administrationimpact of global warming. State and local governments are increasingly considering greenhouse gas emissions regulation. This possibility of increased regulation of greenhouse gas emissions potentially exposes us to imposesignificant new tariffs taxes, fees and other costs. We are also subject to increasing sensitivity to environmental, sustainability and governance (“ESG”) issues. This increased focus on ESG issues may result in new regulations and/or withdraw from or materially modify NAFTA and certain other international trade arrangementscustomer requirements that could adversely affectimpact our business, financial condition and results of operations.

We arrange for the movement of freight into and out of every major city in Mexico and Canada, and we import 53-foot intermodal containers manufactured in China. If the current administration takes action to withdraw from or materially modify the North American Free Trade Agreement (“NAFTA”) or certain shareholders reducing or eliminating their holdings of our stock. Any future limitations on the emission of greenhouse gases, other international trade arrangements,environmental legislation, or to impose tariffs on imports of foreign-manufactured goods into the United States, our business, financial condition and results of operations could be adversely affected.  Additionally, the imposition of substantial tariffs on foreign-made intermodal containers or other products we utilize may increase the cost of providing transportation services or adversely affect our results of operations.

Changes in immigration lawscustomer ESG requirements could increase the costs of doing business or otherwise disrupt our operations.

Wefuture capital expenditures and have hired individuals, including Information Technology (“IT”) employees, from outside the United States.  We have employee drivers and owner-operator drivers who are immigrants to the U.S.  We engage third party consultants, including for various IT projects, who may utilize personnel from outside the United States.  If immigration laws are changed or if new more restrictive government regulations are enacted or increased, our access to qualified and skilled personnel may be limited, the costs of doing business may increase and our operations may be disrupted.

We are exposed to credit risk and fluctuations in the market values of our investment portfolio.

Although we have not recognized any material losses on our cash and cash equivalents, future declines in their market values could have a materialan adverse effectimpact on our financial condition, results of operations and operating results. The value or liquidityliquidity.

We are subject to the risks of our cashlitigation and cash equivalents could decline,governmental inquiries, which could have a material adverse effect on our financial condition and operating results.business.

We faceThe nature of our business exposes us to a variety of litigation risks that could haverelated to a material adverse effect on the operation of our business.

We face litigation risks regarding a varietynumber of issues, including without limitation, accidents involving our trucks and employees, alleged violations of federal and state labor and employment laws, securities laws, environmental liability and other matters. Accordingly, we are, and in the future may be, subject to legal proceedings and claims that have arisen in the ordinary course of our business and may include class and collective allegations. We are also subject to potential governmental proceedings, inquiries, and claims. The parties in such actions may seek amounts from us that may not be covered in whole or in part by insurance. These proceedings may be time-consuming, expensive and disruptive to normal business operations. The defense of such lawsuits could result in significant expense and the diversion of our management’s time and attention from the operation of our business. In recent years, several insurance companies have stopped offering coverage to trucking companies as a result of increases in the severity of automobile liability claims and higher costs of settlements and verdicts. This trend could adversely affect our ability to obtain suitable insurance coverage or could significantly increase our cost for obtaining such coverage, which would adversely affect our financial condition, results of operations, liquidity and cash flows. Costs we incur to defend or to satisfy a judgment or settlement of these claims may not be covered by insurance or could exceed the amount of that coverage or increase our insurance costs and could have a material adverse effect on our financial condition, results of operations, liquidity and cash flows.

Changes in immigration laws could increase the costs of doing business or otherwise disrupt our operations.

We have hired individuals, including Information Technology (“IT”) employees, from outside the United States. We have employee drivers and owner-operator drivers who are immigrants to the United States. We engage third party consultants, including for various IT projects, who may utilize personnel from outside the United States. If immigration laws are changed or if new more restrictive government regulations are enacted or increased, our access to qualified and skilled personnel may be limited, the costs of doing business may increase and our operations may be disrupted.

Our business may be affected by uncertainty or changes in United States or global social, political or regulatory conditions.

We arrange for the movement of freight, a portion of which originates from China, into and out of every major city in the United States, Mexico and Canada, and we import 53-foot intermodal containers manufactured in China.Adverse developments in laws, policies or practices in the United States and internationally can negatively impact our business and the business of our customers. Negative domestic and international global trade conditions as a result of social, political or regulatory changes or perceptions (such as those that might be associated with pandemics) could materially affect our business, financial conditions and results of operations. We provide services both domestically and to a lesser extent outside of the United States, which subjects our business to various additional risks, including:

If we do not correctly anticipate changes in social, political or regulatory conditions or their impact on the transportation industry, we may not alter our business practices in time to avoid adverse effects. Additionally, the occurrence or consequences of any of these factors may restrict our ability to operate in the affected region and/or decrease the profitability of our operations in that region.

Our suppliers may also be affected by changes in the political and regulatory environment, both in the United States and internationally. Negative impacts on our suppliers could result in disruptions in the supply and availability of equipment or services needed for our business that could in turn affect our ability to operate and serve our customers as planned. Additionally, changes to current United States international trade agreements, such as NAFTA and other trade agreements, may lead to fewer goods transported and we may need to restructure certain terms of business with suppliers or customers.

General Risks

Our inability to defend our intellectual property could damage our reputation and incur costs that have a negative impact on our operations or financial condition.

The Company has registered various trademarks and designs in the United States, Mexico and Canada. These marks play a major role in our business as they strengthen our brand recognition while helping accomplish our marketing strategy. Some of our intellectual property rights related to trademarks, trade secrets, domain names, copyrights, or other intellectual property could be challenged or invalidated or misappropriated or infringed upon, by third parties. Our continued efforts to obtain, enforce, protect and defend our intellectual property against a third-party infringement claim may be ineffective and could result in substantial costs which could adversely impact our corporate reputation, business, results of operations, and financial conditions.

Damage to our reputation through unfavorable publicity or the actions of our employees could adversely affect our financial condition.

Our success depends on our ability to consistently deliver operational excellence and strong customer service. Our inability to deliver our services and solutions as promised on a consistent basis, or our customers having a negative experience or otherwise becoming dissatisfied, can negatively impact our relationships with new or existing customers and adversely affect our brand and reputation, which could, in turn, adversely affect revenue and earnings growth. Adverse publicity (whether or not justified) relating to activities by our employees, contractors, agents or others with whom we do business, such as customer service mishaps or noncompliance with laws, could tarnish our reputation and reduce the value of our brand. With the increase in the use of social media outlets such as Facebook, YouTube, Instagram, LinkedIn, Glass Door and Twitter, adverse publicity can be disseminated quickly and broadly, making it increasingly difficult for us to effectively respond. This unfavorable publicity could also require us to allocate significant resources to rebuild our reputation.

The market value of our common stock may fluctuate and could be substantially affected by various factors.

We expect that the market price of our common stock will continue to fluctuate due to a variety of factors, many of which are beyond our control. These factors include, among others:

Our common stock price may fluctuate significantly in the future, and these fluctuations may be unrelated to our performance. General market price declines or market volatility in the future could adversely affect the price of our common stock, and the current market price of our common stock may not be indicative of future market prices.

None.

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Item 1C.SUPPLEMENTARY ITEM.INFORMATION ABOUT OUR EXECUTIVE OFFICERS OF THE REGISTRANT

In reliance on General Instruction G

Pursuant to Form 10-K,Instructions to Item 401 of Regulation S-K, we have included information on our executive officers of the Registrant is included in this Part I.

The table sets forth certain information as of February 1, 20182021 with respect to each person who is an executive officer of the Company.

David P. Yeager has served as our Chairman of the Board since November 2008 and as Chief Executive Officer since March 1995. From March 1995 through November 2008, Mr. Yeager served as Vice Chairman of the Board. From October 1985 through December 1991, Mr. Yeager was President of Hub Chicago. From 1983 to October 1985, he served as Vice President, Marketing of Hub Chicago. Mr. Yeager founded the St. Louis Hub in 1980 and served as its President from 1980 to 1983. Mr. Yeager founded the Pittsburgh Hub in 1975 and served as its President from 1975 to 1977. Mr. Yeager received a Masters in Business Administration degree from the University of Chicago in 1987Booth School of Business and a Bachelor of Arts degree from the University of Dayton in 1975.Dayton. Mr. Yeager is the father of Phillip D. Yeager.

Donald G. MaltbyPhillip D. Yeager was appointed a Director of the Company in May 2016 andnamed President and Chief Operating Officer in September 2015.on July 1, 2019. Prior to this appointment, Mr. MaltbyYeager served as Chief Supply Chain Officer of Hub Supply Chain Solutions from January 2011 to May 2014.  From February 2004 to December 2010, Mr. Maltby served as Executive Vice President-Logistics Services.  Mr. Maltby previously served as President of Hub Online, our e-commerce division, from February 2000 through January 2004.  Mr. Maltby also served as President of Hub Cleveland from July 1990 through January 2000 and from April 2002 to January 2004.  Prior to joining Hub Group, Mr. Maltby served as President of Lyons Transportation, a wholly owned subsidiary of Sherwin Williams Company, from 1988 to 1990.  In his career at Sherwin Williams, which began in 1981 and continued until he joined us in 1990, Mr. Maltby held a variety of management positions including Vice-President of Marketing and Sales for its Transportation Division. Mr. Maltby has been in the transportation and logistics industry since 1976, holding various executive and management positions.  Mr. Maltby received a Masters in Business Administration from Baldwin Wallace College in 1982 and a Bachelor of Science degree from the State University of New York in 1976.

Phillip D. Yeager was named Chief Commercial Officer inoverseeing Intermodal and Truck Brokerage operations as well as sales, pricing, solutions and account management since January 2018 after serving as2018. Mr. Yeager formerly held the role of Executive Vice President, Account Management and Intermodal Operations since January 2016.  Mr. Yeager previously served2016 after serving as Vice President of Account Management and Business Development from

February 2014 to January 2016. Mr. Yeager is responsible for managing Hub Group’s overall customer experience, including customer service, intermodal operations and rail relationships. Mr. Yeager joined Hub Groupthe Company in 2011 as the Director of Strategy and Acquisitions to focus on strategic initiatives and acquisitions throughout the company and lead the integration of Mode Transportation.Mode. Prior to joining Hub Group,the Company, Mr. Yeager served as Assistant Vice President of Commercial Banking at BMO Harris Bank, and as an investment banking analyst for Lazard Freres & Co. Mr. Yeager earned his Bachelor of Arts degree from Trinity College, in Hartford, Connecticut, and a Master of Business Administration degree from the University of Chicago Booth School of Business. Mr. Yeager is the son of David P. Yeager.

Terri A. Pizzuto has been ourGeoffrey F. DeMartino was named Executive Vice President, Chief Financial Officer, and Treasurer in July 2020. Mr. DeMartino spent over 15 years in various financial roles, including corporate development and investment banking, before joining the Company in February 2016 as Vice President of Corporate Development and Strategy. He led the acquisitions of Estenson and CaseStack, and the divesture of Mode in his prior role. Mr. DeMartino received a Bachelor’s degree in Economics from Northwestern University.

Kevin W. Beth was promoted to Executive Vice President and Chief Accounting Officer in July 2020. Mr. Beth joined the Company in October 2003 as Corporate Controller and served as our Controller and Assistant Treasurer since March 2007. Prior to this promotion, Ms. Pizzuto was Vice PresidentHe has been instrumental in transforming the Company’s financial systems and leading the accounting organization through the integration of Finance from July 2002 through February 2007. Prioracquisitions, divestures, and implementation of accounting standards. Mr. Beth is a Certified Public Accountant and held various auditing and corporate accounting positions prior to joining us, Ms. Pizzuto was a partner in the Assurance and Business Advisory Group at Arthur Andersen LLP. Ms. Pizzuto worked for Arthur Andersen LLP for 22

11

years holding various positions and serving numerous transportation companies. Ms. PizzutoCompany. He received a Bachelor of ScienceBachelor’s degree in Accounting from the University of Illinois in 1981. Ms. Pizzuto is a CPA and a member of the American Institute of Certified Public Accountants.

David L. Marsh was named Executive Vice President in May 2016 and Chief Highway Solutions Officer in September 2015 after having served as Chief Supply Chain Officer since May 2014.  Previously, Mr. Marsh served as Chief Marketing Officer from October 2007 to May 2014. Mr. Marsh was Executive Vice President-Highway from February 2004 through September 2007. Mr. Marsh previously served as President of Hub Ohio from January 2000 through January 2004. Mr. Marsh joined us in March 1991 and became General Manager with Hub Indianapolis in 1993, a position he held through December 1999. Prior to joining Hub Group, Mr. Marsh worked for Carolina Freight Corporation, a less than truckload carrier, starting in January 1990. Mr. Marsh received a Bachelor of Science degree in Marketing and Physical Distribution from Indiana University-Indianapolis in 1989. Mr. Marsh has been a member of the American Society of Transportation and Logistics, the Indianapolis Traffic Club, the Council for Logistics Management and served as an advisor to the Indiana University-Indianapolis internship program for transportation and logistics. Mr. Marsh was honored as the Indiana Transportation Person of the Year in 1999.Illinois.

Vava R. Dimond was named an Executive Vice President of the Company in May 2016 and Chief Information Officer in April 2015 after serving as the Interim Chief Information Officer since September 2014. Ms. Dimond began her career with Hub Groupthe Company in June 2013 as the Vice President of Business Engineering, responsible for overseeing Hub Group’sthe Company’s Business Intelligence, Business Engineering and Program Management projects and processes. Previously, Ms. Dimond spent 16 years with Schneider National and held several leadership positions within IT, most recently serving as Vice President of Technology Services. Ms. Dimond earned her Bachelor of Science degree in Economics from South Dakota State University in 1991.  Ms. Dimond is the spouse of Mr. John C. Vesco.

James J. Damman was appointed Executive Vice President in May 2016 after he assumed the role of President of Mode LLC, following the acquisition of Exel Transportation Services from Deutsche Post DHL in April 2011. Prior to this transaction, Mr. Damman served as a President of Exel Transportation Services and President of Technology, Aerospace and Service Logistics Americas for DHL/Exel. Before Exel, he served as a President of Transentric LLC, a supply chain technology provider. Prior to this, Mr. Damman held senior executive roles in operations, marketing, sales and customer service with the Union Pacific Railroad. Mr. Damman has been in Transportation and Supply Chain Management since 1980, holding various executive and management positions. Mr. Damman received a Bachelor of Science degree in Business from Central Michigan University in 1980 and a Master of Business Administration from Southern Illinois University at Edwardsville in 1986.

John C. Vesco was named Executive Vice President, President of Hub Group Trucking in January 2016. Mr. Vesco has led Hub Group Trucking’s operations as its President since January 2015, after serving as Executive Vice President of Hub Group Trucking from March 2012 to December 2014. Prior to joining Hub Group, Mr. Vesco held several management positions with Schneider National, most recently as Vice President and General Manager of Schneider Logistics. Mr. Vesco earned a Bachelor of Arts degree in Finance and Business Administration from Walsh University and a Master of Business Administration degree from Silver Lake College.  Mr. Vesco is the spouse of Ms. Vava R. Dimond.

Brian D. Alexander was named Executive Vice President of Unyson Logistics in September 2015.  Before being named Executive Vice President, Mr. Alexander served as Vice President of Operations of Unyson Logistics from December 2010 to September 2015 and was responsible for the operational execution and excellence for Fortune 500 manufacturing, retail and consumer packaged goods clients. Prior to that, Mr. Alexander was Unyson’s Senior Director of Strategic Accounts, where he had a ten-year history of managing and directing continuous improvement initiatives for key accounts. Mr. Alexander earned a Bachelor’s degree in Business Administration from Marquette University and Master of Business Administration degree from Cardinal Stritch University.

Vincent C. Paperiello was named Chief Solutions Officer in July 2019 after serving as Executive Vice President, Pricing and Yield Management in February 2016 after serving as Vice President, Pricing and Yield Management from March 2014 tosince February 2016. Since joining Hub Groupthe Company in 1993, Mr. Paperiello has held a variety of operational, logistics management and business intelligence positions with the Company. In his current role, he is responsible for our go-to-market analytics organization, ensuring that we are developing and delivering solutions that propel our customers’ businesses. Mr. Paperiello is a member of the Professional Pricing Society and the Intermodal Association of North America, a leading industry trade association representing the combined interest of the intermodal and regional trucking pricing strategy and execution, along with rail relations.freight industry. Mr. Paperiello received a Bachelor of Arts degree in History from Western Illinois University and a Master of Business Administration – Finance degree from DePaul University,University’s Kellstadt Graduate School of Business, graduating with honors both times.

Michele L. McDermott joined the Company in August 2019 as our Chief Human Resources Officer (“CHRO”). Ms. McDermott has nearly 25 years of experience in human resources and, prior to joining the Company, served as Senior Vice President of Human Resources at Assurance Agency from October 2015 through July 2019 and a variety of executive roles at National Express Corporation prior to her employment with Assurance Agency. As CHRO, Ms. McDermott is responsible for developing the Company’s employees, managing diverse workforces, and implementing strategic plans for benefits, safety programs and technology systems. Ms. McDermott earned a Bachelor of Science in Business Administration from Lewis University and a Master of Business Administration, Operations and Finance from DePaul University’s Kellstadt Graduate School of Business. Ms. McDermott is a Society for Human Resources Management Senior Certified Professional and has received her Senior Professional in Human Resources certification from the HR Certification Institute.

Douglas G. Beck was named Executive Vice President, SecretaryGeneral Counsel and General CounselSecretary in May 2016, after serving as Vice President, Secretary and General Counsel since July 2015, and Interim General Counsel since January 2015. In his role, Mr. Beck is responsible for managing the Legal, Human ResourcesCompliance and ComplianceClaims departments. Mr. Beck began his career with Hub Groupjoined the Company in June 2011 as Assistant General Counsel. Prior to joining Hub Group,the Company, Mr. Beck was a Senior Attorney with Alberto-Culver Company from 2007 to 2011. Mr. Beck previously held counsel positions at Navistar International Corporation, Allegiance Healthcare Corporation and Seyfarth Shaw. Mr. Beck earned a Bachelor of Arts degree in American Civilization from the University of Illinois in 1987 graduating summa cum laude and received his Juris Doctor from Northwestern University School of Law in 1992.

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Directors of the Registrant

In addition to David P. Yeager and Donald G. Maltby, the following six individuals are also on our Board of Directors: Gary D. Eppen – currently retired and formerly the Ralph and Dorothy Keller Distinguished Service Professor of Operations Management and Deputy Dean for part-time Masters in Business Administration Programs at The University of Chicago Booth School of Business; James C. Kenny – Director of Kenny Industries, LLC, an asset holding company, and Director of Kerry Group, PLC, a company traded on the London and Dublin stock exchanges; Peter B. McNitt – Vice Chair of BMO Harris Bank, a United States bank; Charles R. Reaves – Chief Executive Officer of Reaves Enterprises, Inc., a real estate development company; Martin P. Slark – Chief Executive Officer of Molex Incorporated, a manufacturer of electronic, electrical and fiber optic interconnection products and systems; and Jonathan P. Ward – Operating Partner at Kohlberg & Co., a leading U.S. private equity firm.

Law.

As of December 31, 2017,2020, we directly, or indirectly through our subsidiaries, operated 3336 offices throughout the United States, Canada and Mexico, including our headquarters in Oak Brook, Illinois and our Company-owned drayage operationsHGT terminals located throughout the United States.  We have corporate offices in Mesa, AZ, Memphis, TN and Dallas, TX and Mode has a temperature protected services division operated out of our Oak Brook, IL headquarters.  All of our office space except for our corporate headquarters is leased. Most office leases have initial terms of more than one year, and many include options to renew. While some of our leases expire in the near term, we do not believe that we will have difficulty in renewing them or in finding alternative office space. We believe that our offices are adequate for the purposes for which they are currently used.

We are a party to litigation incident to our business, including claims for personal injury and/or property damage, bankruptcy preference claims, and claims regarding freight lost or damaged in transit, improperly shipped or improperly billed. Some of the lawsuits to which we are party are covered by insurance and are being defended by our insurance carriers. Some of the lawsuits are not covered by insurance and we defend those ourselves. We do not believe that the outcome of this litigation will have a materially adverse effect on our financial position or results of operations. See Item 1 Business—Risk Management and Insurance and see Note 1416 to the consolidated financial statements under “Legal Matters” for a detailed discussion of our ongoing legal proceedings.proceedings, which note is incorporated herein by reference.

Not applicable.

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PART II

Our Class A Common Stock (“Class A Common Stock”) trades on the NASDAQNasdaq Global Select Market tier of the NASDAQNasdaq Stock Market under the symbol “HUBG.” There is no established trading market for shares of our Class B Common Stock (the “Class B Common Stock” together with the Class A Common Stock, the “Common Stock”). Set forth below are the high and low closing prices for shares of the Class A Common Stock for each full quarterly period in 2017 and 2016.

On February 16, 2018,January 13, 2021, there were approximately 496352 stockholders of record of the Class A Common Stock and in addition, there were an estimated 7,50811,872 beneficial owners of the Class A Common Stock whose shares were held by brokers and other fiduciary institutions. On February 16, 2018,January 13, 2021, there were 109 holders of record of our Class B Common Stock.

Issuer Purchases of Equity Securities

On May 23, 2019, our Board of Directors authorized the purchase of up to $100 million of our Class A Common Stock. Under the program, the shares may be repurchased in the open market or in privately negotiated transactions, from time to time subject to market and other conditions. We did not purchase any stock under this authorization during the fourth quarter of 2020. The approved share repurchase program does not obligate us to repurchase any dollar amount or number of shares and the program may be extended, modified, suspended, or discontinued at any time.

We purchased 70,751 shares of Class A Common Stock related to employee withholding upon vesting of restricted stock in the fourth quarter of 2020. The table below gives information on a monthly basis regarding the number of shares delivered to us by employees to satisfy the mandatory tax withholding requirement upon vesting of restricted stock during the fourth quarter of 2020:

We were incorporated in 1995 and have never paid cash dividends on either the Class A Common Stock or the Class B Common Stock. The declaration and payment of dividends are subject to the discretion of the Board of Directors. Any determination as to the payment of dividends will depend upon our results of operations, capital requirements and financial condition of the Company, and such other factors as the Board of Directors may deem relevant. Accordingly, there can be no assurance that the Board of Directors will declare or pay cash dividends on the shares of Common Stock in the future. Our certificate of incorporation requires that any cash dividends must be paid equally on each outstanding share of Class A Common Stock and Class B Common Stock. Our credit facility prohibits us from paying dividends on the Common Stock if there has been, or immediately following the payment of a dividend there would be, a default or an event of default under the credit facility. We are currently in compliance with the covenants contained in the credit facility.

See Note 15 to the consolidated financial statements for information on share repurchases.

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Performance Graph

The following line graph compares the Company’s cumulative total stockholder return on its Class A Common Stock since December 31, 20122015 with the cumulative total return of the Nasdaq Stock Market Index (NQUSBT) and the Nasdaq Trucking and Transportation Index (NQUSB27707). These comparisons assume the investment of $100 on December 31, 20122015 in each index and in the Company’s Class A Common Stock and the reinvestment of dividends.

Selected Financial Data

(in thousands except per share data)

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On August 31, 2018, we sold our Mode Transportation, LLC (“Mode”) subsidiary. In our 2018 consolidated financial statements, Mode was presented as discontinued operations for that year and all prior periods presented. The balance sheet data above includes Mode’s assets for the year 2016. In 2017, Mode’s assets were classified as held for sale. The selected financial data for 2018 and prior years reflect Mode as discontinued operations. Refer to the Note 4 “Discontinued Operations” to our consolidated financial statements for additional information regarding the sale of Mode.

EXECUTIVE SUMMARY

Hub Group, Inc. (the “Company”, “we”, “us” or “our”) reports two distinct business segments, HubThis section of the Form 10-K generally discusses 2020 and Mode. The Mode segment includes only2019 items and year-to-year comparisons between 2020 and 2019. Discussions of 2018 items and year-to-year comparisons between 2019 and 2018 that are not included in this Form 10-K can be found in “Management's Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the business we acquiredCompany's Annual Report on April 1, 2011. The Hub segment includes all businesses other than Mode. Hub Group refers to the consolidated resultsForm 10-K for the company, including both the Mode and Hub segments. For the segment financial results, refer to Note 5 to the consolidated financial statements.fiscal year ended December 31, 2019, which is incorporated herein by reference.

EXECUTIVE SUMMARY

We are a world class provider of multimodal transportation solutions. Our vision is to be the industry’s premier supply chain solutions provider. We offer comprehensive intermodal, logistics, truck brokerage and dedicated trucking services.

As an intermodal provider, we arrange for the movement of our customers’ freight in containers and trailers, typically over 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 delivery services between origin or destination and rail terminals (referred to as “drayage”) are provided by HGT and third-party local trucking companies.

Our logistics line of business consists of complex transportation management services, including load consolidation, mode optimization and carrier management, as well as warehousing and consolidation services and residential last mile delivery services. We operate throughThese service offerings are designed to take advantage of the increasing trend for shippers to outsource all or a nationwide networkgreater portion of operating centerstheir transportation needs. The CaseStack Acquisition added consolidation and independentwarehousing services that are marketed primarily to consumer goods companies who serve the North American retail channel. Our recent acquisition of NSD in 2020 added a residential last mile delivery service capability for our customers.

Our truck brokerage line of business owners.

We also arrangearranges for the transportation of freight, by truck, providing customers with another option for their transportation needs. We match theour customers’ needs with trucking carriers’ capacity to provide the most effective service and price combinations.combination. As part of our truck brokerage services, we negotiate rates, track shipments in transit and handle claims for freight loss or damage on behalf of our customers.

Our new dedicated service line, HGD, contracts with customers lookingwho require high level of service transportation using equipment dedicated 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.

Our logistics service consists of complex transportation management services, including load consolidation, mode optimizationWe employ sales 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.

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 account managementOur customer solutions group works with our pricing, salesaccount management and operations groups to enhance Hub’s customer margins.our profit margins across all lines of business. We are working on margin enhancement projects including using the most cost effective drayage carriers, improving utilization, improving our accessorial management,network optimization, matching of inbound and outbound loads, reducing empty miles, improving network balanceour recovery of accessorial costs, asset utilization, reducing repositioning costs, providing holistic solutions and routinely reviewing and improving low margin loads.profit freight.

Hub’sOur top 50 customers represent approximately 66%69% of the Hub segment revenue for the year ended December 31, 2017.2020 with one customer responsible for more than 10% of our revenue. We use various performance indicators to manage our business. We closely monitor margin and gains and lossesprofit margins 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.

Mode has approximately 173 agents,Strategic Transactions

On December 9, 2020, we acquired 100% of the equity interest of NSD. Total consideration for the transaction was $103.3 million which consisted of cash paid of $89.7 million and the settlement of Hub’s accounts receivable due from NSD of $13.6 million.  

On December 3, 2018, we completed the CaseStack Acquisition. Total consideration for the transaction was $252.9 million, consisting of 99 sales/operating agents, known as Independent Business Owners (“IBOs”), who sell$249.4 million in cash and operate$3.5 million in a deferred purchase consideration, which was paid equally over the business throughout North America,twenty-four months following the transaction. Prior to being paid, it was included in Accrued Other in our Consolidated Balance Sheet.

On August 31, 2018, we sold Mode. Unless otherwise stated, the information disclosed in Management’s Discussion and 74 sales only agents. Mode also has a temperature protected services division operated out of our Oak Brook, IL headquarters and corporate offices in Memphis, TN and Dallas, TX. Mode’s top 20 customers represent approximately 39%Analysis refers to continuing operations. See Note 4 of the Mode segment revenueConsolidated Financial Statements for the year ended December 31, 2017. We closely monitor revenue and margin for these customers. We believe Mode brings us highly complementary service offerings, more scale and a talented sales channel that allows us to better reach small and midsize customers.additional information regarding results from discontinued operations.

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RESULTS OF OPERATIONS

Year Ended December 31, 20172020 Compared to Year Ended December 31, 20162019

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

Revenue

Hub Group’s revenue increased 12.9% to $4.0 billion in 2017 from $3.6 billion in 2016.

The Hub segment revenue increased 13.6% to $3.1 billion. Intermodal revenue increased 3.8% to $1.9 billion primarily due to higher fuel revenue, 1.1% higher volume and favorable mix, partially offset by a decrease in customer pricing.  Truck brokerage revenue increased 23.5% to $484.0 million due to an 8.8% volume increase as well as a 14.7% increase in fuel, mix and price combined.  Logistics revenue increased 17.7% to $655.5 million related primarily to new customers on-boarded during the year.  Dedicated revenue was $115.0 million from the date of acquisition to December 31, 2017.  

Mode’s revenue increased 8.5% to $1,029.2 million in 2017 from $948.7 million in 2016.  Mode intermodal revenue increased 2.0%, truck brokerage revenue increased 10.5% and logistics revenue increased 24.8%.

The following is a summary of operating results for our business segments (in thousands):and certain items in the consolidated statements of income as a percentage of revenue:

Revenue

Revenue decreased 4.7% to $3.5 billion in 2020 from $3.7 billion in 2019. Intermodal revenue decreased 3.4% to $2.1 billion primarily due to a 4.2% decrease in revenue per load, partially offset a 0.8% increase in volume. Logistics revenue decreased 8.4% to $704.8 million as the growth of CaseStack retail supplier solutions and the acquisition of NSD in December was more than offset by the impact of lost customers. Truck brokerage revenue decreased 0.6% to $431.1 million due to a 10.1% decrease in volume, partially offset by a 9.5% increase in revenue per load. Dedicated’s revenue decreased 10.4% to $267.7 million primarily due to the impact of business we exited, partially offset by growth with new accounts. Our business was significantly impacted by the COVID-19 pandemic and its impact on North American economic conditions, with revenue for the first half of 2020 down 13% as compared to the first half of 2019. Business conditions improved in the second half of 2020, with revenue growing 4% as compared to the prior year. Intermodal volume declined 7% in the first half of 2020 as compared to the prior year but grew 9% in the second half of 2020 as compared to the prior year.

Transportation Costs

Hub Group’s transportationTransportation costs increased to $3.6 billion in 2017 fromwere $3.1 billion in 2016.both 2020 and 2019. Transportation costs in 20172020 consisted of purchased transportation costs of $3.1$2.4 billion and equipment and driver related costs of $449.8$643.5 million compared to 20162019, which consisted of purchased transportation costs of $2.8$2.5 billion and equipment and driver related costs of $360.8$652.3 million.

The Hub segment transportation costs increased to $2.8 billion in 2017 from $2.4 billion in 2016.  Hub segment transportation costs in 2017 consisted of $2.3 billion3.0% decrease in purchased transportation costs up from $2.0 billion in 2016. The 13.5% increase was primarily due to an increasedecreases in truck brokerage volume, decreases in logistics activity, and improved purchasing, partially offset by rail and fuel costs and higher volumes.cost increases. Equipment and driver related costs decreased 1.4% in 2020 primarily due to lower driver wages, partially offset by increased 24.9% to $446.5 million in 2017 from $357.3 million in 2016 due primarily to the equipment and driver related costs of HGD.

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The Mode segment transportation costs increased 10.2% to $907.7 million in 2017 from $823.5 million in 2016. Mode segment transportation costs are primarily purchased transportation costs which increased due primarily to increased business in logistics, an increase in rail and fuel costs and higher volume in truck brokerage.depreciation expense.

Gross Margin

Hub Group’s grossGross margin increased 0.6%decreased 18.4% to $457.5$425.4 million in 20172020 from $454.8$521.1 million in 2016. Hub Group’s gross margin as a percentage of revenue decreased to 11.3% in 2017 from 12.7% in 2016.

2019. The Hub segment gross margin increased 2.0% to $336.1 million.  Hub’s $6.5$95.6 million gross margin increase resulted fromdecrease was the additionresult of HGD and growth in truck brokerage margin, partially offset by decreases in intermodal and logistics margin.  Truck brokerage gross margin increased due to changes in customer mix.all lines of business. Intermodal gross margin decreased primarily because ofdue to lower customer prices than last yearpricing, higher equipment repositioning costs, and increased rail cost increases partially offset by slightly improved volume.costs. Partially offsetting the intermodal gross margin decline was volume growth and the benefits from operational improvements at HGT. Logistics gross margin decreased due to tighter truck capacity that resulted inlower revenue, partially offset by growth with new customers and the acquisition of NSD. Truck brokerage gross margin decreased due to lower revenue and volume,

partially offset by higher margin spot freight and decreased purchased transportation costs and changes in customer mix.on our contractual freight. Dedicated gross margin decreased due to lost customers, partially offset with growth from new customers.

As a percentage of Hub segment revenue, Hub segment gross margin decreased to 10.8%12.2% in 20172020 from 12.1%14.2% in 2016.  2019. Intermodal gross margin as a percentage of sales decreased 170290 basis points because ofdue to lower customer prices than last yearpricing and rail cost increases.higher purchased transportation costs. Truck brokerage gross margin as a percentage of sales decreased 170140 basis points primarily due to lower customer contract rates, increased costs, and a changechanges in customer mix.mix and higher purchased transportation costs. Logistics gross margin as a percentage of sales was flat as the benefits of continuous improvement initiatives were offset by higher purchased transportation costs. Dedicated gross margin as a percentage of sales decreased 190150 basis points due to changes in customer mix and start-uphigher transportation costs, associated with new customer on-boardings.  The addition of HGD partially offset these declines.  by improved operational discipline.

Mode’s gross margin

CONSOLIDATED OPERATING EXPENSES

Salaries and Benefits

Salaries and benefits decreased 3.0% to $121.4$188.8 million in 20172020 from $125.2$236.0 million in 20162019. As a percentage of revenue, salaries and benefits decreased to 5.4% in 2020 from 6.4% in 2019. The decrease of $47.2 million was primarily due to lower variable compensation and lower headcount, including reductions in bonus expense of $26.8 million, salaries expense of $14.7 million, employee benefits expense of $3.3 million and payroll tax expense of $2.3 million. Headcount as of December 31, 2020 and 2019 was 1,989 and 2,024, respectively, which excludes driver headcount, the costs for which are included in transportation costs. The decrease in headcount is primarily due to decreases in intermodaltechnology driven efficiencies and truck brokerageimproved processes, partially offset by an increase in logistics margin.  Mode’s gross margin as a percentage of revenue decreased to 11.8% in 2017 from 13.2% in 2016.

CONSOLIDATED OPERATING EXPENSES

The following table presents certain items in the Consolidated Statements of Income as a percentage of revenue:

Salaries and Benefits

Hub Group’s salaries and benefits increased  to $188.4 million in 2017 from $180.5 million in 2016. As a percentage of revenue, Hub Group’s salaries and benefits decreased to 4.7% in 2017 from 5.1% in 2016.

The Hub segment salaries and benefits increase of $9.4 million was due primarily to the acquisition of HGD.  In addition, increases in salaries expense of $9.0 million, related to employee raises and higher severance expense of $3.1 million, compensation related to restricted stock awards of $1.3 million and an increase in employee benefits expense of $1.0 million, which were offset by decreases in employee bonus expense of $14.3 million, payroll taxes of $0.5 million and sales commissions of $0.3 million.

Mode’s salaries and benefits expense decreased to $13.8 million in 2017 from $15.3 million in 2016. The decrease was due primarily to decreases of $1.0 million related to employee bonus expense and $0.5 million related to salaries expense, employee benefits expense and payroll taxes.

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Hub’s headcount as of December 31, 2017 and 2016 was 1,914 and 1,657, respectively, which excludes drivers, as driver costs are included in transportation costs. The increase in Hub’s headcount is due to the acquisition of HGD.  As of December 31, 2017 and 2016, Mode had 116 and 127 employees, respectively.

Agent Fees and Commissions

Hub Group’s agent fees and commissions increased to $74.1 million in 2017 from $72.9 million in 2016. As a percentage of revenue, these expenses decreased to 1.8% in 2017 from 2.0% in 2016.  The $1.2 million increase was primarily related to Mode’s conversion of the company managed operation to an IBO location in January 2017.NSD.  

General and Administrative

Hub Group’s generalGeneral and administrative expenses increaseddecreased to $85.2$99.6 million in 20172020 from $68.6$104.2 million in 2016.2019. As a percentage of revenue, these expenses increased to 2.1%2.9% in 20172020 from 1.9%2.8% in 2016.

2019. The Hub segment increasedecrease of $16.3$4.6 million in general and administrative expense was due primarily to the acquisitiondecreases in travel, meals and entertainment expenses of HGD and increases$5.0 million, a decrease in IT consulting and professional serviceclaims expense of $4.0 million, expenses related to due diligence and acquisition costsa $4.8 million settlement of $1.7 million, increasesa claim during 2019, decreases in temporary labor expense of $1.1$1.2 million, increased IT maintenanceoffice expense of $1.0 million, telephone expense of $0.9 million, and the impact of our cost reduction efforts. These decreases were partially offset by $5.9 million of expense related to donations of refrigerated trailers in support of COVID-19 efforts, a change$2.2 million increase in professional services related primarily to a consulting project, professional costs related to the gain/lossacquisition of NSD of $1.0 million, lower gains on the sale of assetsequipment of $0.9 million, expenses related to a network optimization study of $0.6 million in 2017, increases in rent expense of $0.6 million, equipment lease expense of $0.3$1.7 million and bad debt expensean impairment of $0.2a lease right-of-use asset of $0.8 million partially offset by decreases in outside sales commissions of $0.4 million and meals and entertainment of $0.2 million.

Mode’s general and administrative expenses increased to $8.1 million in 2017 from $7.8 million in 2016.  The increase was primarily due to increases in bad debt expensethe abandonment of $0.4 million, IT maintenance expense of $0.3 million and gross receipts taxes of $0.2 million, partially offset by a decrease in an intercompany charge from Hub of $0.6 million.leased property.

Depreciation and Amortization

Hub Group’s depreciationDepreciation and amortization increased to $13.3$31.2 million in 20172020 from $9.0$28.5 million in 2016.2019 related primarily to the deployment of IT initiatives. This expense as a percentage of revenue increased to 0.3%0.9% in 20172020 from 0.2%0.8% in 2016.2019.

The Hub segment’s depreciation and amortizationOther Expense, Net

Other expense increased to $12.1$9.7 million in 20172020 from $7.7$8.5 million in 2016.  This increase was related primarily2019 due to lower interest income on cash balances due to the amortization of the HGD trade namedecrease in interest rates and customer relationships as well as depreciation of additional computer software.

Mode’s depreciation and amortization expense decreased to $1.2 million in 2017 from $1.3 million in 2016.  

Other Income (Expense)

Hub Group’s other expense increased to $5.6 million in 2017 from $2.4 million in 2016 due primarily to the additional interest costs related to the acquisition of HGD, an increase inlower foreign currency gains partially offset by lower interest expense related to our equipment debt and less foreign currency translation gains in 2017.lower borrowings.

Provision for Income Taxes

The provisionProvision for income taxes decreased to a benefit of $44.2$22.5 million in 20172020 from an expense $46.6$36.7 million in 2016 due primarily to the favorable impact on income tax expense from the revaluation of deferred tax liabilities as a result of the enactment of the U.S. Tax Cuts and Jobs Act (the “Act”).  Our effective tax rate was a benefit of 48.6% in 2017 and an expense of 38.4% in 2016. 

Net Income

Net income increased to $135.2 million in 2017 from $74.8 million in 2016 due primarily to the revaluation of deferred tax liabilities in connection with the Act, resulting in an income tax benefit in 2017 and increased margin, partially offset by higher operating expenses.

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Year Ended December 31, 2016 Compared to Year Ended December 31, 2015

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

Revenue

Hub Group’s revenue increased 1.3% to $3.6 billion in 2016 from $3.5 billion in 2015 due primarily to higher volume across our business lines.

The Hub segment revenue increased 2.1% to $2.7 billion. Hub segment intermodal revenue was flat at $1.8 billion. Intermodal volume increased 2% and price and mix combined were also up.  These increases were offset by a decline in fuel revenue. Hub segment truck brokerage revenue increased 10% to $392 million. Truck brokerage handled 14% more loads, but fuel, mix and price combined were down 4%.  Hub segment logistics revenue increased 5% to $557 million related primarily to growth with new customers.

Mode’s revenue increased 2.2% to $948.7 million in 2016 from $928.7 million in 2015.  Mode’s intermodal revenue increased 1% primarily due to a 2% increase in volume which was partially offset by a decline in fuel revenue. Mode’s truck brokerage revenue decreased 2% and Mode’s logistics revenue increased 18%.

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