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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

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

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

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

On ~~October 26, 2017,~~July 27, 2018, the registrant had ~~33,451,445~~33,719,269 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.

Hub Group, Inc. is filing this Amendment No. 1 to its Quarterly Report on Form 10-Q for the quarter ended September 30, 2017 (“Form 10-Q”) to add a date to the Section 906 certification in Exhibit 32.1.

	September 30,			December 31,			June 30,			December 31,
	2017			2016			2018			2017
ASSETS	(unaudited)						(unaudited)
CURRENT ASSETS:
Cash and cash equivalents	$	18,558		$	127,404		$	26,753		$	28,557
Accounts receivable trade, net		532,538			473,608			615,690			583,994
Accounts receivable other		10,017			4,331			3,851			5,722
Prepaid taxes		12,134			294			5,268			12,088
Prepaid expenses and other current assets		21,216			16,653			15,763			25,697
TOTAL CURRENT ASSETS		594,463			622,290			667,325			656,058

Restricted investments		24,066			20,877			24,107			24,181
Property and equipment, net		547,881			438,594			618,931			562,150
Other intangibles, net		75,772			11,844			71,501			74,348
Goodwill, net		348,506			262,376			348,106			348,661
Other assets		9,175			4,278			3,534			5,543
TOTAL ASSETS	$	1,599,863		$	1,360,259		$	1,733,504		$	1,670,941

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable trade	$	313,511		$	266,555		$	348,222		$	338,933
Accounts payable other		30,115			21,070			12,418			12,268
Accrued payroll		25,245			36,223			36,487			28,994
Accrued other		53,609			46,013			78,598			59,305
Current portion of capital lease		2,754			2,697			2,794			2,777
Current portion of long term debt		73,052			45,163			86,740			77,266
TOTAL CURRENT LIABILITIES		498,286			417,721			565,259			519,543

Long term debt		214,032			115,529			179,444			214,808
Non-current liabilities		29,181			23,595			39,083			37,927
Long term portion of capital lease		8,418			10,576			6,196			7,696
Deferred taxes		182,464			164,659			132,463			121,095

STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value; 2,000,000 shares authorized; no shares issued or outstanding in 2017 and 2016	-			-
Preferred stock, $.01 par value; 2,000,000 shares authorized; no shares issued or outstanding in 2018 and 2017							-			-
Common stock
Class A: $.01 par value; 97,337,700 shares authorized and 41,224,792 shares issued in 2017 and 2016; 33,451,445 shares outstanding in 2017 and 33,192,982 shares outstanding in 2016		412			412
Class B: $.01 par value; 662,300 shares authorized; 662,296 shares issued and outstanding in 2017 and 2016		7			7
Class A: $.01 par value; 97,337,700 shares authorized and 41,224,792 shares issued in 2018 and 2017; 33,717,169 shares outstanding in 2018 and 33,447,070 shares outstanding in 2017								412			412
Class B: $.01 par value; 662,300 shares authorized; 662,296 shares issued and outstanding in 2018 and 2017								7			7
Additional paid-in capital		170,355			173,565			168,614			173,011
Purchase price in excess of predecessor basis, net of tax benefit of $10,306		(15,458	)		(15,458	)		(15,458	)		(15,458	)
Retained earnings		770,773			735,563			908,934			870,716
Accumulated other comprehensive loss		(172	)		(273	)		(190	)		(194	)
Treasury stock; at cost, 7,773,347 shares in 2017 and 8,031,810 shares in 2016		(258,435	)		(265,637	)
Treasury stock; at cost, 7,507,623 shares in 2018 and 7,777,722 shares in 2017								(251,260	)		(258,622	)
TOTAL STOCKHOLDERS' EQUITY		667,482			628,179			811,059			769,872
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	1,599,863		$	1,360,259		$	1,733,504		$	1,670,941

	Three Months						Nine Months						Three Months						Six Months
	Ended September 30,						Ended September 30,						Ended June 30,						Ended June 30,
	2017			2016			2017			2016			2018			2017			2018			2017

Revenue	$	1,054,360		$	932,814		$	2,872,321		$	2,594,230		$	1,179,093		$	923,596		$	2,275,064		$	1,816,352
Transportation costs		937,836			821,360			2,552,895			2,259,899			1,042,903			822,279			2,016,083			1,613,450
Gross margin		116,524			111,454			319,426			334,331			136,190			101,317			258,981			202,902

Costs and expenses:
Salaries and benefits		49,126			42,610			137,343			130,075			58,092			45,038			114,099			88,217
Agent fees and commissions		19,072			19,072			54,103			54,334			21,969			17,038			41,111			35,031
General and administrative		22,403			17,641			63,341			50,368			20,216			20,114			40,720			40,938
Depreciation and amortization		4,254			2,276			9,215			6,559			3,960			2,549			7,965			4,961
Total costs and expenses		94,855			81,599			264,002			241,336			104,237			84,739			203,895			169,147

Operating income		21,669			29,855			55,424			92,995			31,953			16,578			55,086			33,755

Other income (expense):
Interest expense		(2,345	)		(888	)		(4,474	)		(2,655	)		(2,187	)		(1,032	)		(4,291	)		(2,130	)
Interest and dividend income		58			104			388			286			22			200			44			330
Other, net		404			27			597			1,178			(189	)		-			(244	)		194
Total other expense		(1,883	)		(757	)		(3,489	)		(1,191	)		(2,354	)		(832	)		(4,491	)		(1,606	)

Income before provision for income taxes		19,786			29,098			51,935			91,804			29,599			15,746			50,595			32,149

Provision for income taxes		4,452			11,174			16,725			35,243			7,548			6,204			12,377			12,273

Net income	$	15,334		$	17,924		$	35,210		$	56,561		$	22,051		$	9,542		$	38,218		$	19,876

Other comprehensive income:
Foreign currency translation adjustments		9			(10	)		101			(63	)		(25	)		28			4			92

Total comprehensive income	$	15,343		$	17,914		$	35,311		$	56,498		$	22,026		$	9,570		$	38,222		$	19,968

Basic earnings per common share	$	0.46		$	0.54		$	1.06		$	1.66		$	0.66		$	0.29		$	1.14		$	0.60

Diluted earnings per common share	$	0.46		$	0.54		$	1.06		$	1.66		$	0.66		$	0.29		$	1.14		$	0.60

Basic weighted average number of shares outstanding		33,227			33,212			33,217			34,098			33,389			33,220			33,382			33,213
Diluted weighted average number of shares outstanding		33,335			33,366			33,323			34,172			33,562			33,262			33,520			33,318

	Nine Months Ended September 30,						Six Months Ended June 30,
	2017			2016			2018			2017
Cash flows from operating activities:
Net income	$	35,210		$	56,561
Net Income							$	38,218		$	19,876
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		43,531			32,665			38,251			25,288
Deferred taxes		19,983			13,269			11,767			7,713
Compensation expense related to share-based compensation plans		7,402			6,318			6,982			4,972
Loss (gain) on sale of assets		360			(382	)
Excess tax benefits from share based compensation		-			(524	)
Contingent consideration adjustment								(3,571	)		-
(Gain) loss on sale of assets								(90	)		307
Changes in operating assets and liabilities:
Restricted investments		(3,189	)		545			74			(2,408	)
Accounts receivable, net		(37,448	)		(62,324	)		(29,748	)		26,240
Prepaid taxes		(11,839	)		(1,609	)		6,820			(3,352	)
Prepaid expenses and other current assets		(3,059	)		1,244			9,935			4,493
Other assets		(3,505	)		961			1,869			(2,653	)
Accounts payable		51,459			37,080			9,878			307
Accrued expenses		(13,179	)		(6,968	)		4,857			(18,013	)
Non-current liabilities		1,419			2,181			2,382			368
Net cash provided by operating activities		87,145			79,017			97,624			63,138

Cash flows from investing activities:
Proceeds from sale of equipment		3,052			1,573			1,234			2,356
Purchases of property and equipment		(39,936	)		(59,883	)		(69,261	)		(29,593	)
Acquisitions, net of cash acquired		(165,933	)		-
Net cash used in investing activities		(202,817	)		(58,310	)		(68,027	)		(27,237	)

Cash flows from financing activities:
Proceeds from issuance of debt		73,606			36,100			58,161			16,149
Repayments of long term debt		(59,921	)		(25,074	)		(84,051	)		(23,118	)
Stock tendered for payments of withholding taxes		(3,410	)		(2,484	)		(4,017	)		(3,293	)
Purchase of treasury stock		-			(100,000	)
Capital lease payments		(2,101	)		(1,965	)		(1,483	)		(1,399	)
Excess tax benefits from share-based compensation		-			212
Payment of debt issuance costs		(1,397	)		-
Net cash provided by (used in) financing activities		6,777			(93,211	)
Net cash used in financing activities								(31,390	)		(11,661	)


Effect of exchange rate changes on cash and cash equivalents		49			(50	)		(11	)		95

Net decrease in cash and cash equivalents		(108,846	)		(72,554	)
Net (decrease) increase in cash and cash equivalents								(1,804	)		24,335
Cash and cash equivalents beginning of the period		127,404			207,749			28,557			127,404
Cash and cash equivalents end of the period	$	18,558		$	135,195		$	26,753		$	151,739

Supplemental disclosures of cash paid for:
Interest	$	4,033		$	2,636		$	4,182		$	2,176
Income taxes	$	12,880		$	26,826		$	752		$	10,743

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

The financial statements reflect, in our opinion, all material adjustments (which include only normal recurring adjustments) necessary to fairly present our financial position as of ~~September~~June 30, ~~2017~~2018 and results of operations for the ~~three and nine~~six months ended ~~September~~June 30, ~~2017~~2018 and ~~2016.~~2017. Certain amounts in prior periods have been reclassified to conform with current period presentation.

These unaudited consolidated financial statements and notes thereto should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2017. Results of operations in interim periods are not necessarily indicative of results to be expected for a full year due partially to seasonality.

Accounting Standards Update. On January 1, 2018 we adopted the Accounting Standards Codification (ASC) topic 606, Revenue from Contracts with Customers. Under this new standard our significant accounting policy for revenue is as follows:

Revenue:Revenue is recognized at the time (1) persuasive evidence of an arrangement exists, (2) services have been rendered, (3) the sales price is fixed and determinable and (4) collectability is reasonably assured. We generally recognize revenue over time because of continuous transfer of control to the customer. Since control is transferred over time, revenue and related transportation costs are recognized based on relative transit time, which is based on the extent of progress towards completion of the related performance obligation. We enter into contracts that can include various combinations of services, which are capable of being distinct and accounted for as separate performance obligations. We account for a contract when it has approval and commitment from both parties, the rights of the parties are identified, payment terms are identified, the contract has commercial substance and collectability of consideration is probable. Taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction, that are collected by the Company from a customer, are excluded from revenue. Further, in most cases, we report our revenue on a gross basis because we are the primary obligor as we are responsible for providing the service desired by the customer. Our customers view us as responsible for fulfillment including the acceptability of the service. Service requirements may include, for example, on-time delivery, handling freight loss and damage claims, setting up appointments for pick-up and delivery and tracing shipments in transit. We have discretion in setting sales prices and as a result, the amount we earn varies. In addition, we have the discretion to select our vendors from multiple suppliers for the services ordered by our customers. These factors, discretion in setting prices and discretion in selecting vendors, further support reporting revenue on a gross basis for most of our revenue.

The Company capitalizes commissions incurred in connection with obtaining a contract. The Company capitalized commissions associated with dedicated services of $0.4 million at June 30, 2018. Capitalized commission fees are amortized based on the transfer of services to which the assets relate and are included in selling, general and administrative expenses. In 2018, the amount of amortization was approximately $30,000.

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

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

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

Hub Group Trucking (HGT), a wholly owned subsidiary of Hub Group, Inc., acquired all of the outstanding equity interests of Estenson Logistics, LLC (“Estenson”) on July 1, 2017 (the “Estenson Acquisition”). Estenson is 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. HGD is included in the Hub segment.

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

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

~~The following table summarizes the total purchase price allocated to the net assets acquired (in thousands):~~

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

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

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

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

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

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

	Three Months		Three Months		Six Months
	Ended		Ended		Ended
	September 30, 2016		June 30, 2017		June 30, 2017
Revenue	$	988,345	$	983,029	$	1,930,373
Net income	$	20,249	$	12,450	$	24,053
Earnings per share
Basic	$	0.61	$	0.38	$	0.73
Diluted	$	0.61	$	0.38	$	0.72

The unaudited pro forma consolidated results for the three and ~~nine~~six month periods were prepared using the acquisition method of accounting and are based on the historical financial information of Hub Group and HGD. The historical financial information has been adjusted to give effect to the pro forma adjustments that are: (i) directly attributable to the acquisition, (ii) factually supportable and (iii) expected to have a continuing impact on the combined results. The unaudited pro forma consolidated results are not necessarily indicative of what our consolidated results of operations actually would have been had we completed the acquisition on January 1, ~~2016.~~2017.

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

Hub offers comprehensive multimodal solutions including intermodal, truck brokerage, ~~dedicated~~logistics and ~~logistics~~dedicated services. Our employees operate the freight through a network of operating centers and terminals located in the United States, Canada and Mexico. Each operating center is strategically located in a market with a significant concentration of shipping customers and one or more railheads. Hub has full time employees located throughout the United States, Canada and Mexico.

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

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

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

Intermodal. As an intermodal provider, we arrange for the movement of our customers’ freight in containers and trailers, typically over long distances of 750 miles or more. We contract with railroads to provide transportation for the long-haul portion of the shipment and with local trucking companies, known as “drayage companies,” for pickup and delivery. As part of our intermodal services, we negotiate rail and drayage rates, electronically track shipments in transit, consolidate billing and handle claims for freight loss or damage on behalf of our customers.

~~The following~~Truck Brokerage (Highway Services). We are one of the largest truck brokers in the United States, providing customers with a highway service option for their transportation needs. We match the customers’ needs with carriers’ capacity to provide the most effective service and price combination. We have contracts with a substantial base of carriers allowing us to meet the varied needs of our customers. As part of the truck brokerage services, we negotiate rates, track shipments in transit and handle claims for freight loss and damage on behalf of our customers.

Logistics and Other Services. Hub’s logistics business operates under the name of Unyson Logistics. Unyson Logistics is comprised of a ~~summary~~network of logistics professionals dedicated to developing, implementing and operating ~~results~~customized logistics solutions for customers. Unyson Logistics offers a wide range of transportation management services and technology solutions including shipment optimization, load consolidation, mode selection, carrier management, load planning and execution and web-based shipment visibility. Unyson Logistics operates throughout North America, providing services through its main operating location in St. Louis with additional support locations in the Boston and Chicago metro areas. In addition, certain ~~other financial data~~Mode LLC agents also provide logistics services. Our multi-modal transportation capabilities for ~~our business~~both the Hub and Mode segments ~~(in thousands):~~include small parcel, heavyweight, expedited, less-than-truckload, truckload, intermodal, railcar and international shipping.

Three Months

Three Months

Ended September 30, 2017

Ended September 30, 2016

Inter-

Hub

Inter-

Hub

Segment

Group

Segment

Group

Hub

Mode

Elims

Total

Hub

Mode

Elims

Total

Revenue
$
820,802

$
258,696

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

$
716,699

$
251,611

$
(35,496
)
$
932,814

Transportation costs

734,747

228,227

(25,138
)

937,836

638,154

218,702

(35,496
)

821,360

Gross margin

86,055

30,469

-

116,524

78,545

32,909

-

111,454

Costs and expenses:

Salaries and benefits

45,727

3,399

-

49,126

38,775

3,835

-

42,610

Agent fees and commissions

15

19,057

-

19,072

20

19,052

-

19,072

General and administrative

20,520

1,883

-

22,403

15,969

1,672

-

17,641

Depreciation and amortization

3,962

292

-

4,254

1,959

317

-

2,276

Total costs and expenses

70,224

24,631

-

94,855

56,723

24,876

-

81,599

Operating income
$
15,831

$
5,838

$
-

$
21,669

$
21,822

$
8,033

$
-

$
29,855

Capital Expenditures
$
10,170

$
173

$
-

$
10,343

$
34,411

$
255

$
-

$
34,666

~~The following tables summarize our revenue by segment~~Dedicated: Our dedicated service line, HGD, contracts with customers who wish to outsource a portion of their transportation needs. We offer a dedicated fleet of equipment and ~~business line (in thousands) for~~drivers to each customer, as well as the ~~quarter ended September 30:~~

management and infrastructure to operate according to the customer’s high service expectations.

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

	Nine Months									Nine Months									Three Months									Three Months
	Ended September 30, 2017									Ended September 30, 2016									Ended June 30, 2018									Ended June 30, 2017
					Inter-			Hub						Inter-			Hub						Inter-			Hub						Inter-			Hub
					Segment			Group						Segment			Group						Segment			Group						Segment			Group
	Hub		Mode		Elims			Total		Hub		Mode		Elims			Total		Hub		Mode		Elims			Total		Hub		Mode		Elims			Total
Revenue	$	2,203,142	$	743,621	$	(74,442	)	$	2,872,321	$	1,980,450	$	692,366	$	(78,586	)	$	2,594,230	$	888,238	$	314,078	$	(23,223	)	$	1,179,093	$	704,344	$	242,998	$	(23,746	)	$	923,596
Transportation costs		1,972,725		654,612		(74,442	)		2,552,895		1,739,676		598,809		(78,586	)		2,259,899		788,087		278,039		(23,223	)		1,042,903		631,787		214,238		(23,746	)		822,279
Gross margin		230,417		89,009		-			319,426		240,774		93,557		-			334,331		100,151		36,039		-			136,190		72,557		28,760		-			101,317

Costs and expenses:
Salaries and benefits		126,891		10,452		-			137,343		118,658		11,417		-			130,075		53,839		4,253		-			58,092		41,569		3,469		-			45,038
Agent fees and commissions		46		54,057		-			54,103		47		54,287		-			54,334		11		21,958		-			21,969		14		17,024		-			17,038
General and administrative		57,330		6,011		-			63,341		44,917		5,451		-			50,368		17,768		2,448		-			20,216		18,331		1,783		-			20,114
Depreciation and amortization		8,319		896		-			9,215		5,603		956		-			6,559		3,719		241		-			3,960		2,249		300		-			2,549
Total costs and expenses		192,586		71,416		-			264,002		169,225		72,111		-			241,336		75,337		28,900		-			104,237		62,163		22,576		-			84,739

Operating income	$	37,831	$	17,593	$	-		$	55,424	$	71,549	$	21,446	$	-		$	92,995	$	24,814	$	7,139	$	-		$	31,953	$	10,395	$	6,184	$	-		$	16,578

Capital Expenditures	$	39,732	$	204	$	-		$	39,936	$	59,356	$	527	$	-		$	59,883	$	46,337	$	745	$	-		$	47,082	$	22,937	$	31	$	-		$	22,968

	Six Months									Six Months
	Ended June 30, 2018									Ended June 30, 2017
					Inter-			Hub						Inter-			Hub
					Segment			Group						Segment			Group
	Hub		Mode		Elims			Total		Hub		Mode		Elims			Total
Revenue	$	1,719,823	$	601,977	$	(46,736	)	$	2,275,064	$	1,380,824	$	484,832	$	(49,304	)	$	1,816,352
Transportation costs		1,529,297		533,522		(46,736	)		2,016,083		1,236,462		426,292		(49,304	)		1,613,450
Gross margin		190,526		68,455		-			258,981		144,362		58,540		-			202,902

Costs and expenses:
Salaries and benefits		105,909		8,190		-			114,099		81,164		7,053		-			88,217
Agent fees and commissions		25		41,086		-			41,111		31		35,000		-			35,031
General and administrative		36,170		4,550		-			40,720		36,810		4,128		-			40,938
Depreciation and amortization		7,478		487		-			7,965		4,357		604		-			4,961
Total costs and expenses		149,582		54,313		-			203,895		122,362		46,785		-			169,147

Operating income	$	40,944	$	14,142	$	-		$	55,086	$	22,000	$	11,755	$	-		$	33,755

Capital Expenditures	$	67,874	$	1,387	$	-		$	69,261	$	29,562	$	31	$	-		$	29,593

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

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

	Nine Months									Nine Months									Three Months									Three Months
	Ended September 30, 2017									Ended September 30, 2016									Ended June 30, 2018									Ended June 30, 2017
					Inter-			Hub						Inter-			Hub						Inter-			Hub						Inter-			Hub
					Segment			Group						Segment			Group						Segment			Group						Segment			Group
	Hub		Mode		Elims			Total		Hub		Mode		Elims			Total		Hub		Mode		Elims			Total		Hub		Mode		Elims			Total
Intermodal	$	1,350,187	$	357,516	$	(41,768	)	$	1,665,935	$	1,318,223	$	355,379	$	(61,974	)	$	1,611,628	$	526,028	$	141,221	$	(6,559	)	$	660,690	$	451,420	$	112,089	$	(12,866	)	$	550,643
Truck brokerage		324,823		248,311		(1,330	)		571,804		261,456		228,350		(676	)		489,130		114,936		103,168		(84	)		218,020		104,289		82,869		(310	)		186,848
Logistics		470,186		137,794		(31,299	)		576,681		400,771		108,637		(15,936	)		493,472		173,421		69,689		(16,580	)		226,530		148,635		48,040		(10,570	)		186,105
Dedicated		57,946		-		(45	)		57,901		-		-		-			-		73,853		-		-			73,853		-		-		-			-
Total revenue	$	2,203,142	$	743,621	$	(74,442	)	$	2,872,321	$	1,980,450	$	692,366	$	(78,586	)	$	2,594,230	$	888,238	$	314,078	$	(23,223	)	$	1,179,093	$	704,344	$	242,998	$	(23,746	)	$	923,596

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

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

	Three Months Ended, September 30,				Nine Months Ended, September 30,				Three Months Ended, June 30,				Six Months Ended, June 30,
	2017		2016		2017		2016		2018		2017		2018		2017

Net income for basic and diluted earnings per share	$	15,334	$	17,924	$	35,210	$	56,561	$	22,051	$	9,542	$	38,218	$	19,876

Weighted average shares outstanding - basic		33,227		33,212		33,217		34,098		33,389		33,220		33,382		33,213

Dilutive effect of stock options and restricted stock		108		154		106		74		173		42		138		105

Weighted average shares outstanding - diluted		33,335		33,366		33,323		34,172		33,562		33,262		33,520		33,318

Earnings per share - basic	$	0.46	$	0.54	$	1.06	$	1.66	$	0.66	$	0.29	$	1.14	$	0.60

Earnings per share - diluted	$	0.46	$	0.54	$	1.06	$	1.66	$	0.66	$	0.29	$	1.14	$	0.60

The carrying value of cash, ~~and cash equivalents,~~ accounts receivable and accounts payable ~~and long term debt~~ approximated fair value as of ~~September~~June 30, ~~2017~~2018 and December 31, ~~2016 due~~2017. At June 30, 2018 and December 31, 2017 the fair value of the Company’s fixed-rate borrowings was $3.6 million and $2.4 million less than the historical carrying value of $266.2 million and $247.1 million. The fair value of the fixed-rate borrowings was estimated using an income approach based on current interest rates available to ~~their short-term nature.~~the Company for borrowings on similar terms and maturities.

We consider as cash equivalents all highly liquid instruments with an original maturity of three months or less. As of ~~September~~June 30, ~~2017~~2018 and December 31, ~~2016,~~2017, our cash and temporary investments were with high quality financial institutions in Demand Deposit Accounts (DDAs) and Savings Accounts.

Restricted investments, as of ~~September~~June 30, ~~2017~~2018 of $24.1 million and December 31, ~~2016~~2017 of ~~$20.9~~$24.2 million, ~~included~~consisted of mutual funds which are reported at fair ~~value.~~value and are related to the liabilities of our nonqualified deferred compensation plan.

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

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

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

We have standby letters of credit that expire at various dates in ~~2017~~2018 and ~~2018.~~2019. As of ~~September~~June 30, ~~2017,~~2018, our letters of credit were ~~$13.5~~$23.0 million.

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

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

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

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

We incurred $1.4 million of financing costs related to the Credit Agreement during the third quarter of 2017, which we capitalized and will amortize to interest expense over the term of the agreement. The unamortized balance of $1.3 million is included in Other assets in the Unaudited Consolidated Balance Sheet as of September 30, 2017.

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

Period Ended

September 30,

December 31,

2017

2016

(in thousands except principal and interest payments)

Revolving line of credit
$
50,000

$
-

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

12,388

-

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

11,554

-

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

32,517

-

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

81,176

59,836

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

57,305

48,633

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

40,803

49,464

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

1,280

2,759

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

61

-

287,084

160,692

Less current portion

(73,052
)

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

$
115,529

	June 30,			December 31,
	2018			2017
	(in thousands except principal and interest payments)


Revolving line of credit	$	-		$	45,000

Secured Equipment Notes due on various dates in 2024 with monthly principal and interest payments between $403 and $83,000 commencing on various dates in 2017; interest is paid monthly at a fixed annual rate between 2.85% and 3.41%		12,691			13,586

Secured Equipment Notes due on various dates in 2023 with monthly principal and interest payments between $669 and $341,341 commencing on various dates in 2016, 2017 and 2018; interest is paid monthly at a fixed annual rate between 2.23% and 3.91%		91,077			36,981

Secured Equipment Notes due on various dates in 2022 with monthly principal and interest payments between $3,030 and $254,190 commencing on various dates from 2015 to 2017; interest is paid monthly at a fixed annual rate of between 2.16% and 2.87%		27,435			30,301

Secured Equipment Notes due on various dates in 2021 with monthly principal and interest payments between $1,940 and $352,655 commencing on various dates from 2014 to 2017; interest is paid monthly at a fixed annual rate between 2.04% and 2.96%		66,863			76,885

Secured Equipment Notes due on various dates in 2020 with monthly principal and interest payments between $3,614 and $398,496 commencing on various dates from 2013 to 2016; interest is paid monthly at a fixed annual rate between 1.72% and 2.78%		42,960			50,737

Secured Equipment Notes due on various dates in 2019 with monthly principal and interest payments between $1,594 and $325,050 commencing on various dates from 2013 to 2015; interest is paid monthly at a fixed annual rate between 1.79% and 2.62%		25,158			36,178

Secured Equipment Notes due on various dates in 2018 with monthly principal and interest payments between $6,480 and $163,428 commencing on various dates in 2013 and 2014; interest is paid monthly at a fixed annual rate between 2.05% and 2.7%		-			2,406

		266,184			292,074

Less current portion		(86,740	)		(77,266	)
Total long-term debt	$	179,444		$	214,808

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

Since January 1, 2018 we have committed to ~~be approximately $40~~acquire 869 tractors for $107.2 million. As of ~~October 21, 2017,~~June 30, 2018 we received 380 tractors, which are being financed with debt, and we expect to receive the remaining 489 tractors from July to December of 2018. We expect to finance these tractors with debt.

Since January 1, 2018 we have committed to acquire 760 trailers for $24.2 million. As of June 30, 2018 we received ~~2,156 containers. We anticipate receiving another 394 containers by the end of the year,~~217 trailers, which will be financed with debt, and we expect to receive the remaining ~~1,450~~543 trailers from July to ~~be delivered in~~December of 2018. We ~~will be financing the purchase of this equipment~~expect to finance these trailers with ~~secured fixed rate~~ debt.

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

On January 25, 2013, a complaint was filed in the U.S. District Court for the Eastern District of California (Sacramento Division) by Salvador Robles against our subsidiary ~~Comtrak Logistics, Inc., now known as~~ Hub Group Trucking, ~~Inc. Mr. Robles drove a truck for Hub Group Trucking in California, first as an independent contractor and then as an employee.~~Inc (“HGT”). The action ~~was~~is brought on behalf of a class comprised of present and former California-based truck drivers for ~~Hub Group Trucking~~HGT who were classified as independent contractors, from January 2009 to August 2014. ~~The complaint~~It alleges ~~Hub Group Trucking~~HGT has misclassified such drivers as independent contractors and that such drivers were employees. ~~The complaint~~It asserts various violations of the California Labor Code and claims that ~~Hub Group Trucking~~HGT has engaged in unfair competition practices. The complaint seeks, among other things, declaratory and injunctive relief, ~~compensatory~~monetary damages and attorney’s fees. In May 2013, the complaint was amended to add similar claims based on Mr. Robles’ status as an employed company driver. These additional claims are only on behalf of Mr. Robles and not a putative class.

The Company believes that the California independent contractor truck drivers were properly classified as independent contractors at all times. Nevertheless, because lawsuits are expensive, time-consuming and could interrupt our business operations, ~~Hub Group Trucking~~HGT decided to make settlement offers to individual drivers with respect to the claims alleged in this lawsuit, without admitting liability. As of ~~September~~June 30, ~~2017, 93%~~2018, 96% of the California drivers have accepted the settlement ~~offers which were paid in 2015 or earlier.~~offers. In late 2014, ~~Hub Group Trucking~~HGT decided to convert its model from independent contractors to employee drivers in ~~California.~~California (the “Conversion”). In early 2016, ~~Hub Group Trucking~~HGT closed its operations in Southern California.

On April 3, 2015, the Robles case was transferred to the U.S. District Court for the Western District of Tennessee (Western Division) in Memphis. In May 2015, the plaintiffs in the Robles case filed a Second Amended Complaint (“SAC”) which names 334 current and former Hub Group Trucking drivers as “interested putative class members.” In addition to reasserting their existing claims, the SAC includes claims ~~post-conversion,~~post-Conversion, added two new plaintiffs and seeks a judicial declaration that the settlement agreements are unenforceable. In June 2015, Hub Group Trucking filed a motion to dismiss the SAC and on July 19, 2016, Hub Group Trucking’s motion to dismiss was granted in part, and denied in part, by the District Court. The motion to dismiss was granted for the claims of all purported class members who have signed settlement agreements and on plaintiffs’ claims based on quantum merit and it was denied with respect to federal preemption and choice of law. On August 11, 2016, Plaintiffs filed a motion to clarify whether the Court’s dismissal of the claims of all purported class members who signed settlement agreements was with or without prejudice and, if the dismissal was with prejudice, Plaintiffs moved the Court to revise and reconsider the order. On July 2, 2018, the Court denied the Plaintiffs’ ~~motion to clarify is fully briefed~~Motion for Clarification or Reconsideration and stated that the ~~parties are awaiting a decision by~~dismissal of the ~~Court.~~claims of all purported class members who signed settlement agreements was with prejudice.

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

On October 29, 2015, Defendants filed a notice of removal to ~~remove~~move the case from state court in San Bernardino to federal court in the Central District of California. On November 19, 2015, Defendants filed a motion to transfer the case to federal court in Memphis, Tennessee and also filed a motion to dismiss the case pursuant to a clause in the independent contractor agreement stating that Tennessee law applies. Also on November 19, 2015, Plaintiffs filed a motion to remand the case back to state court, claiming that the federal court lacks jurisdiction over the ~~case.~~case because there is not complete diversity of citizenship between the parties and the amount in controversy threshold is not satisfied. The court granted Plaintiffs’ motion to remand to the state court in San Bernardino County on April 7, ~~2016, mooting Defendants’ motions to transfer and dismiss.~~2016.

On July 11, 2016, Defendants filed ~~several motions~~dismissal papers in state court, asking the court to dismiss ~~and/or stay the~~ Plaintiffs’ suit for various ~~reasons.~~reasons, including that the agreement between HGT and its former California owner operators requires that this action be brought in Memphis, Tennessee, or stay the action pending the outcome of Robles. Defendants also asked the court to dismiss the individual defendants because PAGA’s language does not allow for individual liability. During a hearing on October 5, 2016, the judge issued an oral tentative ruling stating that the choice of forum provision was unenforceable. On Defendants’ motion to dismiss the individual defendants, the court allowed for supplemental briefing for additional arguments regarding individual liability under PAGA. The court did not reach a decision regarding the motion to stay pending the outcome in Robles. Plaintiffs filed their supplemental brief on November 9, 2016 to which Defendants responded on December 6, 2016.

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

Defendant’s motion to dismiss based on insufficiency of the PAGA letter notice. On October 5,19, 2017, Plaintiffs ~~served~~filed an amended complaint, ~~in part~~ dismissing the previously named individuals as Defendants.

On ~~September 12, 2014,~~December 4, 2017, Defendants filed an Answer to Plaintiffs’ First Amended Complaint and a ~~complaint was filed~~Memorandum of Points and Authorities in ~~the U.S. District Court~~Support of their Motion for the Northern District of Illinois (Eastern Division) by Christian Lubinski against Hub Group Trucking. The action was brought on behalf of a class comprised of present and former owner-operators providing delivery services in Illinois for Hub Group Trucking. The complaint alleged Hub Group Trucking misclassified such drivers as independent contractors and that such drivers were employees. The complaint also alleged that Hub Group Trucking made illegal deductions from the drivers’ pay and failed to properly compensate the drivers for all hours worked, reimburse business expenses, pay employment taxes, and provide workers’ compensation and other employment benefits. The complaint asserted various violations of the Illinois Wage Payment and Collections Act and claimed that Hub Group Trucking was unjustly enriched. The complaint sought, among other things, monetary damages for the relevant statutory period and attorneys’ fees.

On October 24, 2014, the Lubinski case was transferred to the U.S. District Court for the Western District of Tennessee (Western Division), in Memphis. On September 22, 2015, the court granted Hub Group Trucking’s motion to dismiss Lubinski’s Illinois law claims with prejudice basedJudgment on the ~~contractual choice of law provision, which provided~~Pleadings arguing that ~~Tennessee law governed. The court denied as moot Hub Group Trucking’s motion to dismiss based~~judgement should be entered for Defendants because Plaintiffs’ claims are preempted by the Federal Truth-In-Leasing regulations. On January 31, 2018, a hearing was held on ~~federal preemption. On October 2, 2015, Lubinski appealed this order to the United States Court of Appeals for the Sixth Circuit in Cincinnati.~~

~~On December 17, 2015, Lubinski filed his brief in support of his appeal of~~ the motion to dismiss, asserting for the first time that the federal court did not have jurisdiction over the case due to a lack of diversity of citizenship. Hub Group Trucking filed its response brief on January 19, 2016, in part arguing that Lubinski had himself alleged diversity of citizenship in his complaint. Lubinski filed his reply briefand on February ~~5, 2016.~~1, 2018, the motion was denied. On ~~April 1, 2016, the Sixth Circuit remanded the case to the district court—without ruling on the merits—~~March 27, 2018, Defendants filed a petition for ~~the district court “to consider the argument and admit the evidence necessary to determine the question~~a writ of ~~federal subject-matter jurisdiction.”~~

~~On July 11, 2016, with his federal district court case still pending, Lubinski filed an additional putative class action Complaint,~~mandate with the ~~same claims, in Illinois state court.~~Court of Appeals. On June 12, 2018, the same day, Hub Group Trucking filed a declaratory judgment complaint in Tennessee state court, seeking a declaration that Lubinski’s claims must be heard in Tennessee (based on the contractual choice-of-forum provision) and that the claims must be dismissed because Tennessee law controls and Lubinski’s claims are preempted by federal law.

On October 26, 2016, Lubinski filed a motion to dismiss for lack of federal subject-matter jurisdiction and a motion for leave to file an amended complaint, attempting to “clarify” the putative class definition and arguing that the Class Action Fairness Act’s exceptions to jurisdiction apply. In early 2017, Plaintiff’s counsel advised Hub Group Trucking that Lubinski would no longer challenge federal jurisdiction. On February 15, 2017, the District Court adopted the parties’ stipulation and found that there is federal subject-matter jurisdiction. On March 22, 2017, the U.S. Court of Appeals ~~for~~denied the ~~Sixth Circuit granted Plaintiff’s motion to recall the mandate and reinstate Lubinski’s appeal of the district court’s order dismissing the case.~~petition. On June ~~8, 2017,~~21, 2018, Defendants filed a petition for review with the ~~Sixth Circuit issued an Opinion affirming the District Court’s dismissal of Plantiff’s claims. On June 30, 2017, the Sixth Circuit issued the Mandate in the case, which terminates the 6~~^th ~~Circuit appeal proceedings. Plaintiff had until September 6, 2017, to ask the U.S.~~California Supreme ~~Court to review the case. Plaintiff did not file any petition with~~Court. There is no timetable for when the Supreme Court sowill decide if it will review the ~~case is completed.~~

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

We are a party to other litigation incident to our business, including claims for personal injury and/or property damage, bankruptcy preference claims, and claims regarding freight lost or damaged in transit, improperly shipped or improperly billed. Some of the 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.

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

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

Due to the complexities involved in accounting for ~~principal vs agent and identifying performance obligations.~~

~~The guidance permits two methods~~the enactment of ~~adoption: retrospectively to each prior reporting~~the Act, the SEC Staff Accounting Bulletin No. 118 (“SAB No. 118”) allows for a one-year period, ~~presented (full retrospective method), or retrospectively with the cumulative effect of initially applying the guidance recognized at~~from the date of ~~initial application (the cumulative catch-up transition method)~~enactment, to complete the related income tax accounting for the Act and allows for the use of provisional amounts until that accounting is complete.

The Company recorded provisional amounts in earnings for the year ended December 31, 2017 as certain deferred tax assets and liabilities were remeasured based on the rates at which they are expected to reverse in the future, which is generally 21%. We currently anticipate adopting the standard using the full retrospective method to restate each prior reporting period presented, if material. We will elect to record sales tax on a net basis. We do not expect this election to have a material impact on our consolidated financial statements.

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

~~While~~However, we are ~~continuing to assess all potential impacts~~still analyzing aspects of the ~~standard, other than additional disclosures, we do not anticipate that~~Act and refining our calculations, which could potentially affect the measurement of these balances or potentially give rise to new deferred tax amounts until the federal income tax return for 2017 is filed later this ~~standard will have a material impact on our consolidated financial statements. We have identified and analyzed our revenue streams and continue to analyze our current and historical contracts.~~year.

In ~~February 2016,~~January 2017, the FASB issued ASU No. ~~2016-02, Leases, which requires lessees to recognize~~2017-01, Business Combinations (Topic 805) Clarifying the Definition of a ~~right-to-use asset and~~Business. This ASU clarifies the definition of a ~~lease obligation~~business when evaluating whether transactions should be accounted for ~~all leases. Lessees are permitted to make an accounting policy election to not recognize an asset and liability for leases with a term~~as acquisitions (or disposals) of ~~twelve months~~assets or ~~less.~~businesses. The new standard ~~will become~~is effective for fiscal years, and interim periods within those fiscal years, beginning ~~with the first quarter of 2019. Early adoption of the~~after December 15, 2017. This standard ~~is permitted. We plan to adopt this standard~~was adopted on January 1, ~~2019, as required. We are currently evaluating the impacts the adoption of this accounting guidance will have on the consolidated financial statements.~~

~~In March 2016, the FASB issued ASU 2016-09, Improvements~~2018. Any impact would apply to ~~Employee Share-Based Payment Accounting~~, which simplifies several aspects of the accounting for employee share-based payment transactions including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification of related amounts within the statement of cash flows. The new standard became effective beginning with the first quarter of 2017. We adopted ASU 2016-09 in the first quarter of 2017 and the adoption did not have a material impact on our consolidated financial statements. We have applied the reclassification of excess tax benefits prospectively and therefore the prior period has not been adjusted.future acquisitions.

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

In February 2016, the FASB issued ~~new guidance~~ASU No. 2016-02, Leases, which ~~clarifies the classification of certain cash receipts~~requires lessees to recognize a right-to-use asset and ~~cash payments in the statement of cash flows, including debt prepayment or extinguishment costs, settlement of contingent consideration arising from~~ a ~~business combination, insurance settlement proceeds, and distributions from certain equity method investees.~~lease obligation for all leases. The new standard iswill become effective ~~for fiscal years, and interim periods within those fiscal years,~~ beginning ~~after December 15, 2017. Early~~with the first quarter of 2019, but early adoption is permitted. We plan to adopt this standard January 1, 2019, as required. The standard also provides an additional transition method to assist entities with the implementation. Entities that elect this option would adopt the new standard using a modified retrospective transition method, but they would recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption rather than in the earliest period presented. We will elect to apply a package of practical expedients and will not reassess at the date of initial adoption (1) whether any expired or existing contracts are or contain leases, (2) the lease classification for any expired or existing leases, or (3) initial direct costs for existing leases. Lessees can also make an accounting policy election to not recognize an asset and liability for leases with a term of twelve months or less. We will elect this short-term lease policy. We are currently reviewing our leases and evaluating the impact the adoption of ~~adopting~~ this ~~new~~ accounting guidance will have on ~~our~~the consolidated financial statements.

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

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

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

Hub Group, Inc. (“we”, “us” or “our”) reports two distinct business segments. The first segment is “Mode,” which includes the acquired Mode LLC business only. The second segment is “Hub,” which is all business other than Mode. Hub Group (as opposed to just Hub), refers to the consolidated results for the whole company, including both the Mode and Hub segments. For the segment financial results, refer to Note 3 to the unaudited consolidated financial statements.

We are ~~one~~a world class provider of ~~the largest intermodal marketing companies (“IMC”) in the United States and a multi modal transportation provider offering~~multimodal logistics solutions. We offer comprehensive intermodal, truck brokerage, dedicated and logistics services. We operate through a nationwide network of operating centers and independent business owners.

~~As an IMC,~~Through our network, we arrange for the movement of our customers’ freight in containers and trailers over long distances. We contract with railroads to provide transportation for the long-haul portion of the shipment and with local trucking companies, known as “drayage companies,” for local pickup and delivery. As part of ~~the~~our intermodal services, we negotiate rail and drayage rates, electronically track shipments in transit, consolidate billing and handle claims for freight loss or damage on behalf of our customers.

~~For the quarter ended September~~As of June 30, ~~2017, approximately 53%~~2018, our subsidiary HGT accounted for 54% of Hub’s drayage needs ~~were met~~ by ~~our subsidiary, Hub Group Trucking, Inc., which assists~~assisting us in providing reliable, cost effective intermodal services to our customers. As of ~~September~~June 30, ~~2017, Hub Group Trucking~~2018, HGT leased or owned ~~915~~approximately 1,000 tractors ~~owned 345~~and 300 trailers, employed ~~1,011~~approximately 1,200 drivers and contracted with ~~1,586 owner-operators for their services and equipment.~~approximately 1,300 owner-operators.

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

Our new dedicated service line, HGD, contracts with customers looking to outsource a portion of their transportation needs. We offer an exclusive dedicated fleet of equipment and drivers, as well as the management and infrastructure to operate according to the customer’s high service expectations. Our dedicated service line currently operates a fleet of approximately 986 tractors and 3,665 trailers at 119 locations throughout the United States. As of September 30, 2017, HGD employed 1,269 drivers.

~~Our~~ logistics service consists of complex transportation management services, including load consolidation, mode optimization and carrier management. These service offerings are designed to take advantage of the increasing trend for shippers to outsource all or a greater portion of their transportation needs.

Our dedicated service line, HGD, contracts with customers looking to outsource a portion of their transportation needs. We offer a dedicated fleet of equipment and drivers to each customer, as well as the management and infrastructure to operate according to the customer’s high service expectations. As of June 30, 2018, HGD has an operating fleet of approximately 1,500 tractors and 5,100 trailers.

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

Hub’s yield management group works with pricing, account management and operations to enhance Hub’s customer margins. We are working on margin enhancement projects including ~~increasing prices,~~ matching up inbound and outbound loads, reducing empty miles, improving our recovery of accessorial costs, ~~reducing~~optimizing our drayage ~~and accessorial~~costs, reducing repositioning costs and reviewing and improving low contribution freight.

Hub’s top 50 customers represent approximately ~~64%~~68% of the Hub segment revenue for the ~~nine~~six months ended ~~September~~June 30, ~~2017.~~2018. We use various performance indicators to manage our business. We closely monitor margin and ~~volume~~gains and losses for our top 50

customers. We also evaluate on-time performance, cost per load and daily sales outstanding by customer account. Vendor cost changes and vendor service issues are also monitored closely.

Mode has approximately ~~175~~170 agents, consisting of ~~102~~101 sales/operating agents, known as Independent Business Owners (“IBOs”), who sell and operate the business throughout North America and 7369 sales only agents. Mode also has a corporate ~~offices~~office in Dallas, a temperature protected services division, Temstar, located in Oak Brook, IL and a corporate ~~offices~~office in Memphis. Mode’s top 20 customers represent approximately 39% of the Mode segment revenue for the ~~nine~~six months ended ~~September~~June 30, ~~2017.~~2018. 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.~~

Three Months Ended ~~September~~June 30, ~~2017~~2018 Compared to the Three Months Ended ~~September~~June 30, ~~2016~~2017

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

	Three Months									Three Months									Three Months									Three Months
	Ended September 30, 2017									Ended September 30, 2016									Ended June 30, 2018									Ended June 30, 2017
					Inter-			Hub						Inter-			Hub						Inter-			Hub						Inter-			Hub
					Segment			Group						Segment			Group						Segment			Group						Segment			Group
	Hub		Mode		Elims			Total		Hub		Mode		Elims			Total		Hub		Mode		Elims			Total		Hub		Mode		Elims			Total
Intermodal	$	473,998	$	123,194	$	(13,665	)	$	583,527	$	466,283	$	126,052	$	(21,857	)	$	570,478	$	526,028	$	141,221	$	(6,559	)	$	660,690	$	451,420	$	112,089	$	(12,866	)	$	550,643
Truck brokerage		113,179		87,242		(634	)		199,787		96,906		79,627		(174	)		176,359		114,936		103,168		(84	)		218,020		104,289		82,869		(310	)		186,848
Logistics		175,679		48,260		(10,794	)		213,145		153,510		45,932		(13,465	)		185,977		173,421		69,689		(16,580	)		226,530		148,635		48,040		(10,570	)		186,105
Dedicated		57,946		-		(45	)		57,901		-		-		-			-		73,853		-		-			73,853		-		-		-			-
Total revenue	$	820,802	$	258,696	$	(25,138	)	$	1,054,360	$	716,699	$	251,611	$	(35,496	)	$	932,814	$	888,238	$	314,078	$	(23,223	)	$	1,179,093	$	704,344	$	242,998	$	(23,746	)	$	923,596

Hub Group’s revenue increased ~~13.0%~~27.7% to ~~$1,054.4~~$1,179.1 million in ~~2017~~2018 from ~~$932.8~~$923.6 million in ~~2016.~~2017.

The Hub segment revenue increased ~~14.5%~~26.1% to ~~$820.8~~$888.2 million. Intermodal revenue increased ~~1.7%~~16.5% to ~~$474.0~~$526.0 million ~~primarily~~ due to a 4.4% increase in volume, an increase in fuel revenue and ~~freight rates, partially offset by a slightly unfavorable mix.~~improved pricing. Truck brokerage revenue increased ~~16.8%~~10.2% to ~~$113.2 million due to a 3.2% increase in volume, with~~$114.9 million. Truck brokerage handled 5.4% fewer loads, while fuel, mix and price ~~and mix~~ combined were up ~~13.6%~~15.6%. Logistics revenue increased ~~14.4%~~16.7% to ~~$175.7~~$173.4 million due primarily to growth with ~~new customers on-boarded this year. Dedicated’s~~existing customers. Dedicated revenue ~~for the quarter~~ was ~~$57.9~~$73.9 million.

Mode’s revenue increased ~~2.8%~~29.3% to ~~$258.7~~$314.1 million in ~~2017~~2018 from ~~$251.6~~$243.0 million in ~~2016.~~2017. Mode’s intermodal revenue increased 26.0% to $141.2 million, truck brokerage ~~revenue~~ increased ~~9.6%~~24.5% to $103.2 million, and logistics ~~revenue~~ increased ~~5.1% while intermodal revenue decreased 2.3%.~~45.1% to $69.7 million.

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

	Three Months									Three Months									Three Months									Three Months
	Ended September 30, 2017									Ended September 30, 2016									Ended June 30, 2018									Ended June 30, 2017
					Inter-			Hub						Inter-			Hub						Inter-			Hub						Inter-			Hub
					Segment			Group						Segment			Group						Segment			Group						Segment			Group
	Hub		Mode		Elims			Total		Hub		Mode		Elims			Total		Hub		Mode		Elims			Total		Hub		Mode		Elims			Total
Revenue	$	820,802	$	258,696	$	(25,138	)	$	1,054,360	$	716,699	$	251,611	$	(35,496	)	$	932,814	$	888,238	$	314,078	$	(23,223	)	$	1,179,093	$	704,344	$	242,998	$	(23,746	)	$	923,596
Transportation costs		734,747		228,227		(25,138	)		937,836		638,154		218,702		(35,496	)		821,360		788,087		278,039		(23,223	)		1,042,903		631,787		214,238		(23,746	)		822,279
Gross margin		86,055		30,469		-			116,524		78,545		32,909		-			111,454		100,151		36,039		-			136,190		72,557		28,760		-			101,317

Costs and expenses:
Salaries and benefits		45,727		3,399		-			49,126		38,775		3,835		-			42,610		53,839		4,253		-			58,092		41,569		3,469		-			45,038
Agent fees and commissions		15		19,057		-			19,072		20		19,052		-			19,072		11		21,958		-			21,969		14		17,024		-			17,038
General and administrative		20,520		1,883		-			22,403		15,969		1,672		-			17,641		17,768		2,448		-			20,216		18,331		1,783		-			20,114
Depreciation and amortization		3,962		292		-			4,254		1,959		317		-			2,276		3,719		241		-			3,960		2,249		300		-			2,549
Total costs and expenses		70,224		24,631		-			94,855		56,723		24,876		-			81,599		75,337		28,900		-			104,237		62,163		22,576		-			84,739

Operating income	$	15,831	$	5,838	$	-		$	21,669	$	21,822	$	8,033	$	-		$	29,855	$	24,814	$	7,139	$	-		$	31,953	$	10,395	$	6,184	$	-		$	16,578

Hub Group’s transportation costs increased ~~14.2%~~26.8% to ~~$937.8~~$1,042.9 million in ~~2017~~2018 from ~~$821.4~~$822.3 million in ~~2016.~~2017. Transportation costs in ~~2017~~2018 consisted of purchased transportation costs of ~~$804.0~~$888.9 million and equipment and driver related costs of ~~$133.8~~$154.0 million compared to ~~2016~~2017 costs of purchased transportation of ~~$728.7~~$730.9 million and equipment and driver related costs of ~~$92.7~~$91.4 million.

The Hub segment transportation costs increased ~~15.1%~~24.7% to ~~$734.7~~$788.1 million in ~~2017~~2018 from ~~$638.2~~$631.8 million in ~~2016.~~2017. Hub segment transportation costs in ~~2017~~2018 included ~~$601.8~~$635.1 million in purchased transportation, up from ~~$546.5~~$541.2 million in ~~2016.~~2017. The ~~10.1%~~17.4% increase in purchased transportation costs was due primarily to rail cost increases, an increase in fuel costs, higher third party carrier costs, and higher volumes. Equipment and driver related costs increased ~~44.9%~~68.9% to ~~$132.9~~$153.0 million in ~~2017~~2018 from ~~$91.7~~$90.6 million in ~~2016~~2017 due primarily to the equipment and driver related costs of ~~HGD.~~HGD, including start-up costs and an increase in driver pay.

The Mode segment transportation costs increased ~~4.4%~~29.8% to ~~$228.2~~$278.0 million in ~~2017~~2018 from ~~$218.7~~$214.2 million in ~~2016.~~2017. Mode segment transportation costs are primarily purchased transportation costs which increased due to ~~growth~~higher rail costs, fuel costs, carrier costs and increased business levels in ~~brokerage and~~ logistics and ~~rail cost increases in~~ intermodal.

Hub Group’s gross margin increased ~~4.5%~~34.4% to ~~$116.5~~$136.2 million in ~~2017~~2018 from ~~$111.5~~$101.3 million in ~~2016.~~2017. Hub Group’s gross margin as a percentage of sales ~~decreased~~increased to ~~11.1%~~11.6% as compared to last year’s ~~11.9%~~11.0% margin.

The Hub segment gross margin increased ~~9.6%~~38.0% to ~~$86.1~~$100.2 million. ~~The~~ Hub segment margin increase of ~~$7.5~~$27.6 million resulted from the addition of HGD and growth in intermodal and truck brokerage, ~~margin~~ partially offset by a ~~decline~~decrease in ~~intermodal and logistics margin.~~logistics. Intermodal gross margin ~~decreased primarily because of rail cost increases~~increased due to improved pricing and higher ~~equipment costs, resulting partially from longer~~volume. Partially offsetting margin growth were higher rail ~~transits, partially offset by higher prices~~ and ~~improvement in loaded miles.~~drayage costs. Truck brokerage ~~gross~~ margin increased as a result of more spot business. Logistics margin decreased due to changes in customer mix, higher ~~value added business~~purchased transportation costs and ~~more spot business.~~headwinds from the liquidation of a customer.

As a percentage of revenue, Hub segment gross margin increased to 11.3% in 2018 from 10.3% in 2017. Intermodal gross margin increased due to improved prices, partially offset by rail and drayage cost increases. Second quarter average rail transits were up 0.7 days which negatively impacted our results. All of these factors combined drove a 170 basis point improvement in intermodal gross margin as a percent of sales. Truck brokerage gross margin as a percentage of sales was flat compared to the prior year. Logistics gross margin ~~declined primarily~~as a percentage of sales was down 160 basis points due to ~~start-up costs related to new business on boarded this quarter, tighter truck capacity that resulted in~~ higher purchased transportation costs and changes in customer mix.

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

Mode’s gross margin ~~decreased~~increased to ~~$30.5~~$36.0 million in 2018 from $28.8 million in 2017 ~~from $32.9 million in 2016~~ due to ~~a decrease~~increases in ~~intermodal and truck brokerage~~ margin ~~partially offset by an increase~~ in ~~logistics gross margin.~~all three business lines. Mode’s gross margin as a percentage of revenue decreased to 11.5% in 2018 from 11.8% in 2017 ~~from 13.1% in 2016~~ due to ~~a 220 basis point decline in truck brokerage yields,~~ a 130 basis point decline in logistics yields, a 50 basis point decline in intermodal yields ~~and~~partially offset by a 30 basis point ~~decline~~improvement in ~~logistics~~truck brokerage yields.

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

	Three Months Ended				Three Months Ended
	September 30,				June 30,
	2017		2016		2018		2017

Revenue		100.0%		100.0%	100.0%			100.0%

Transportation costs		88.9		88.1		88.4		89.0

Gross margin		11.1		11.9		11.6		11.0

Costs and expenses:
Salaries and benefits		4.7		4.6		5.0		4.9
Agent fees and commissions		1.8		2.0		1.9		1.8
General and administrative		2.1		1.9		1.7		2.2
Depreciation and amortization		0.4		0.2		0.3		0.3
Total costs and expenses		9.0		8.7		8.9		9.2

Operating income		2.1		3.2		2.7		1.8

Hub Group’s salaries and benefits ~~expense~~ increased to ~~$49.1~~$58.1 million in ~~2017~~2018 from ~~$42.6~~$45.0 million in ~~2016.~~2017. As a percentage of revenue, Hub Group’s salaries and benefits increased to ~~4.7%~~5.0% in ~~2017~~2018 from ~~4.6%~~4.9% in ~~2016.~~

The Hub segment salaries and benefits ~~expense~~ increase of ~~$7.0~~$12.3 million was primarily due to the ~~acquisition~~addition of HGD ~~and an increase in salaries~~employees, higher employee bonus of $6.0 million, restricted stock compensation of $1.0 million, commissions sales expense of ~~$1.2~~$0.6 million, payroll taxes of $0.5 million partially offset by ~~a decrease in bonus~~lower severance expense of ~~$1.9~~$2.4 million.

Mode’s salaries and benefits expense ~~decreased~~increased to ~~$3.4~~$4.3 million in 2018 from $3.5 million in 2017 ~~from $3.8 million in 2016~~ due primarily to ~~decreases~~an increase in employee bonus ~~expense and salaries expense of $0.2 million each.~~expense.

Hub Group’s headcount as of ~~September~~June 30, 2018 and 2017 was 2,077 and ~~2016 was 2,034 and 1,746,~~1,726 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, which has 342 employees excluding drivers at June 30, 2018. As of ~~September~~June 30, ~~2017~~2018 and ~~2016,~~2017, Mode had ~~115~~123 and ~~129~~115 employees, respectively.

Hub Group’s agent fees and commissions ~~expense remained consistent at $19.1~~increased to $22.0 million in ~~both 2017 and 2016.~~2018 from $17.0 million in 2017. As a percentage of revenue, these expenses ~~decreased~~increased to 1.9% in 2018 from 1.8% in ~~2017 from 2.0% in 2016.~~2017.

The Mode segment agent fees and commissions ~~expense remained consistent at $19.1~~increased $4.9 million due primarily to the increase in ~~both 2017 and 2016.~~Mode’s gross margin.

Hub Group’s general and administrative ~~expense~~expenses increased to ~~$22.4~~$20.2 million in ~~2017~~2018 from ~~$17.6~~$20.1 million in ~~2016.~~2017. These expenses, as a percentage of revenue, ~~increased~~decreased to ~~2.1%~~1.7% in ~~2017~~2018 from ~~1.9%~~2.2% in ~~2016.~~2017.

~~The~~ Hub segment ~~increase in~~ general and administrative ~~expense of $4.6 million~~expenses decreased $0.6 million. This was due primarily to the ~~acquisition of HGD and increases in~~ ~~IT consulting and professional service expense of $1.2~~$3.6 million ~~expenses~~fair value adjustment related to ~~a network optimization study of $0.6 million, temporary labor expense of $0.3 million and bad debt expense of $0.2 million, partially offset by a decrease~~the Estenson Logistics, LLC acquisition (see Note 5 “Fair Value Measurement”), decreases in travel and entertainment of $0.6 million, increase on the gain on sale of equipment of $0.4 million, and a decrease in insurance expense of $0.3 million. These declines were partially offset by the general and administrative expenses of HGD and an increase in professional services of $0.5 million.

Mode’s general and administrative ~~expense~~expenses increased to ~~$1.9~~$2.4 million ~~2017~~2018 from ~~$1.7~~$1.8 million in ~~2016~~2017 due to ~~increased~~ increases in professional services of $0.6 million and increases in IT maintenance expense ~~consulting and professional service expenses and bad debt expense.~~of $0.3 million. These increases were partially offset by decreases in gross receipt taxes of $0.3 million.

Hub Group’s depreciation and amortization ~~expense~~ increased to ~~$4.3~~$4.0 million in ~~2017~~2018 from ~~$2.3~~$2.5 million in ~~2016.~~2017. This expense as a percentage of revenue ~~increased to 0.4%~~remained consistent at 0.3% in ~~2017 from 0.2% in 2016.~~both 2018 and 2017.

The Hub segment depreciation ~~and amortization~~ expense increased to ~~$4.0~~$3.7 million in ~~2017~~2018 from ~~$2.0~~$2.2 million in ~~2016.~~2017. This increase was related primarily to addition of depreciation and amortization due to the ~~amortization~~addition of ~~the HGD~~ ~~trade name and customer relationships~~ ~~as well as depreciation of additional~~ ~~software~~.HGD.

Mode’s depreciation ~~and amortization~~ expense ~~remained consistent at~~decreased to $0.2 million in 2018 from $0.3 million in ~~both 2017 and 2016.~~2017.

Total other expense increased to ~~$1.9~~$2.4 million in ~~2017~~2018 from $0.8 million in ~~2016~~2017 due ~~primarily~~ to ~~the acquisition of HGD and~~ an increase in interest expense related to our ~~equipment~~tractor, trailer and container debt ~~partially offset by higher foreign currency translation gains in 2017.~~including the acquisition of HGD.

The provision for income taxes ~~decreased~~increased to ~~$4.5~~$7.5 million in 2018 from $6.2 million in 2017, while the effective tax rate decreased to 25.5% in 2018 from ~~$11.2 million~~39.4% in ~~2016. We provided~~2017. The provision for income taxes ~~using an effective rate of 22.5%~~increased primarily due to higher pre-tax income in ~~2017 and an effective rate of 38.4% in 2016. The 2017~~2018, while the 2018 effective tax rate was lower primarily due to ~~claiming a deduction for domestic production activities incurred during~~ the ~~2013, 2016,~~enactment of the U.S. Tax Cuts and Jobs Act (the “Act”) on December 22, 2017, which reduced the U.S. federal corporate tax ~~years.~~rate from 35% to 21%. We expect our effective tax rate for the remainder of ~~2017~~2018 will range from 24.5% to ~~be between 31.5% and 32.5%~~25.5%.

Net income ~~decreased~~increased to ~~$15.3~~$22.1 million in 2018 from $9.5 million in 2017 ~~from $17.9 million in 2016~~ due primarily to increased margin partially offset by higher operating expenses, ~~and~~higher interest expense, ~~partially offset by increased margin~~ and ~~lower~~higher income tax ~~expense in 2017. All of the above are inclusive of the HGD acquisition.~~expense.

~~Nine~~Six Months Ended ~~September~~June 30, ~~2017~~2018 Compared to the ~~Nine~~Six Months Ended ~~September~~June 30, ~~2016~~2017

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

	Nine Months									Nine Months									Six Months									Six Months
	Ended September 30, 2017									Ended September 30, 2016									Ended June 30, 2018									Ended June 30, 2017
					Inter-			Hub						Inter-			Hub						Inter-			Hub						Inter-			Hub
					Segment			Group						Segment			Group						Segment			Group						Segment			Group
	Hub		Mode		Elims			Total		Hub		Mode		Elims			Total		Hub		Mode		Elims			Total		Hub		Mode		Elims			Total
Intermodal	$	1,350,187	$	357,516	$	(41,768	)	$	1,665,935	$	1,318,223	$	355,379	$	(61,974	)	$	1,611,628	$	1,008,522	$	270,995	$	(17,829	)	$	1,261,688	$	875,843	$	234,269	$	(28,103	)	$	1,082,009
Truck brokerage		324,823		248,311		(1,330	)		571,804		261,456		228,350		(676	)		489,130		234,955		203,889		(442	)		438,402		210,473		161,031		(695	)		370,809
Logistics		470,186		137,794		(31,299	)		576,681		400,771		108,637		(15,936	)		493,472		342,098		127,093		(28,450	)		440,741		294,508		89,532		(20,506	)		363,534
Dedicated		57,946		-		(45	)		57,901		-		-		-			-		134,248		-		(15	)		134,233		-		-		-			-
Total revenue	$	2,203,142	$	743,621	$	(74,442	)	$	2,872,321	$	1,980,450	$	692,366	$	(78,586	)	$	2,594,230	$	1,719,823	$	601,977	$	(46,736	)	$	2,275,064	$	1,380,824	$	484,832	$	(49,304	)	$	1,816,352

Hub Group’s revenue increased to ~~$2.9~~$2.3 billion in ~~2017~~2018 from ~~$2.6~~$1.8 billion ~~2016.~~

The Hub segment revenue increased ~~11.2%~~24.6% to ~~$2.2~~$1.7 billion. Intermodal revenue increased ~~2.4%~~15.1% to ~~$1.4~~$1.0 billion primarily due to ~~higher~~a 4.9% increase in volume, an increase in fuel revenue, and ~~0.7% higher volume. This increase was partially offset by a decrease in price.~~ improved pricing. Truck brokerage revenue increased ~~24.2%~~11.6% to ~~$324.8 million due to an 11.5% volume increase as well as a 12.7% increase in~~$235.0 million. Truck brokerage handled 3.1% fewer loads, while fuel, mix and price ~~combined.~~ combined were up 14.7%. Logistics revenue increased ~~17.3%~~16.2% to ~~$470.2~~$342.1 million ~~related primarily~~due to growth ~~of new customers on-boarded in late 2016 and during 2017. Dedicated’s revenue was $57.9 million.~~

Mode’s revenue increased ~~7.4%~~24.2% to ~~$743.6~~$602.0 million in ~~2017~~2018 from ~~$692.4~~$484.8 million in ~~2016.~~ 2017. Mode’s intermodal revenue increased ~~0.6%~~15.7%, truck brokerage revenue increased ~~8.7%~~26.6% and logistics revenue increased ~~26.8%~~42.0%.

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

	Nine Months									Nine Months									Six Months									Six Months
	Ended September 30, 2017									Ended September 30, 2016									Ended June 30, 2018									Ended June 30, 2017
					Inter-			Hub						Inter-			Hub						Inter-			Hub						Inter-			Hub
					Segment			Group						Segment			Group						Segment			Group						Segment			Group
	Hub		Mode		Elims			Total		Hub		Mode		Elims			Total		Hub		Mode		Elims			Total		Hub		Mode		Elims			Total
Revenue	$	2,203,142	$	743,621	$	(74,442	)	$	2,872,321	$	1,980,450	$	692,366	$	(78,586	)	$	2,594,230	$	1,719,823	$	601,977	$	(46,736	)	$	2,275,064	$	1,380,824	$	484,832	$	(49,304	)	$	1,816,352
Transportation costs		1,972,725		654,612		(74,442	)		2,552,895		1,739,676		598,809		(78,586	)		2,259,899		1,529,297		533,522		(46,736	)		2,016,083		1,236,462		426,292		(49,304	)		1,613,450
Gross margin		230,417		89,009		-			319,426		240,774		93,557		-			334,331		190,526		68,455		-			258,981		144,362		58,540		-			202,902

Costs and expenses:
Salaries and benefits		126,891		10,452		-			137,343		118,658		11,417		-			130,075		105,909		8,190		-			114,099		81,164		7,053		-			88,217
Agent fees and commissions		46		54,057		-			54,103		47		54,287		-			54,334		25		41,086		-			41,111		31		35,000		-			35,031
General and administrative		57,330		6,011		-			63,341		44,917		5,451		-			50,368		36,170		4,550		-			40,720		36,810		4,128		-			40,938
Depreciation and amortization		8,319		896		-			9,215		5,603		956		-			6,559		7,478		487		-			7,965		4,357		604		-			4,961
Total costs and expenses		192,586		71,416		-			264,002		169,225		72,111		-			241,336		149,582		54,313		-			203,895		122,362		46,785		-			169,147

Operating income	$	37,831	$	17,593	$	-		$	55,424	$	71,549	$	21,446	$	-		$	92,995	$	40,944	$	14,142	$	-		$	55,086	$	22,000	$	11,755	$	-		$	33,755

Hub Group’s transportation costs increased 25.0% to ~~$2.6~~$2.0 billion in ~~2017~~2018 from ~~$2.3~~$1.6 billion in ~~2016.~~2017. Transportation costs in ~~2017~~2018 consisted of purchased transportation costs of ~~$2.2~~$1.7 billion and equipment and driver related costs of ~~$316.0~~$292.1 million compared to ~~2016~~2017 costs of purchased transportation of ~~$2.0~~$1.4 billion and equipment and driver related costs of ~~$271.4~~$182.2 million.

The Hub segment transportation cost increased by ~~13.4%~~23.7% to ~~$2.0~~$1.5 billion in ~~2017~~2018 from ~~$1.7~~$1.2 billion in ~~2016.~~2017. Hub segment transportation costs in ~~2017~~2018 included ~~$1.66~~$1.2 billion in purchased transportation, up from ~~$1.47~~$1.0 billion in ~~2016.~~2017. The ~~12.8%~~17.4% increase in purchased transportation costs was due primarily to rail cost increases, an increase in fuel costs, higher third party carrier costs, and higher volumes. Equipment and driver related costs increased ~~16.5%~~60.7% to ~~$313.5~~$290.2 million in ~~2017~~2018 from ~~$269.1~~$180.6 million in ~~2016~~2017 due primarily to the equipment and driver related costs of ~~HGD.~~HGD, including start-up costs and an increase in driver pay.

The Mode segment transportation costs increased ~~9.3%~~25.2% to ~~$654.6~~$533.5 million in ~~2017~~2018 from ~~$598.8~~$426.3 million in ~~2016.~~2017. Mode segment transportation costs are primarily purchased transportation costs which increased due to higher rail costs, fuel costs, carrier costs and increased business levels in ~~logistics.~~logistics and intermodal.

Hub Group’s gross margin ~~decreased 4.5%~~increased 27.6% to ~~$319.4~~$259.0 million in ~~2017~~2018 from ~~$334.3~~$202.9 million in ~~2016.~~

The Hub segment gross margin ~~decreased 4.3%~~increased 32.0% to ~~$230.4~~$190.5 million. ~~Hub’s $10.4~~Hub segment margin increase of $46.2 million ~~gross margin decrease~~ resulted from the addition of HGD and growth in intermodal and truck brokerage, partially offset by a decrease in ~~margin in intermodal and logistics partially offset by an increase in truck brokerage and dedicated margins.~~logistics. Intermodal gross margin ~~decreased primarily because~~increased due to improved pricing and higher volume. Partially offsetting margin growth were higher rail and drayage costs. Truck brokerage margin increased as a result of ~~lower~~more spot business and growth with targeted customer ~~prices than last year and rail cost increases partially offset by slightly improved volume.~~accounts. Logistics ~~gross~~ margin decreased due to changes in customer mix, higher purchased transportation costs and ~~start-up costs associated with new customer on-boardings. Truck brokerage gross margin increased resulting~~headwinds from ~~growth with targeted customer accounts. The addition~~the liquidation of ~~HGD partially offset the overall gross margin decline.~~a customer.

As a percentage of revenue, Hub segment ~~revenue,~~ gross margin ~~decreased~~increased to 11.1% in 2018 from 10.5% in ~~2017 from 12.2%~~2017. Intermodal gross margin increased due to mproved prices partially offset by rail cost and drayage cost increases. Average rail transits were up 0.7 days which negatively impacted our results. All of these factors combined drove a 110 basis point improvement in ~~2016. Intermodal~~intermodal gross margin as a ~~percentage~~percent of ~~sales decreased 230 basis points because of lower customer prices than last year and rail cost increases partially offset by improved volume.~~sales. Truck brokerage gross margin as a percentage of sales ~~was down 260~~increased 20 basis points compared to the prior year due primarily to ~~lower customer contract rates, increased costs, and a change~~increases in ~~customer mix.~~spot market opportunities. Logistics gross margin as a percentage of sales was down ~~170~~220 basis points due to higher purchased transportation costs and changes in customer ~~mix and start-up costs associated with new customer on-boardings. The addition of HGD partially offset these declines.~~mix.

Mode’s gross margin ~~decreased 4.9%~~increased 16.9% to ~~$89.0~~$68.5 million in 2018 from $58.5 million in 2017 ~~from $93.6 million~~due to increases in ~~2016~~ ~~due primarily to decreases~~margin in ~~intermodal and truck brokerage offset by an increase in logistics.~~all three business lines. Mode’s gross margin as a percentage of revenue decreased to ~~12.0%~~11.4% in 2018 from 12.1% in 2017 ~~from 13.5%~~due to a 160 basis point decline in ~~2016.~~logistics yields, a 70 basis point decline in intermodal yields and a 50 basis point decline in truck brokerage yields.

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

	Nine Months Ended				Six Months Ended
	September 30,				June 30,
	2017		2016		2018		2017

Revenue		100.0%		100.0%	100.0%			100.0%

Transportation costs		88.9		87.1		88.6		88.8

Gross margin		11.1		12.9		11.4		11.2

Costs and expenses:
Salaries and benefits		4.8		5.0		5.0		4.8
Agent fees and commissions		1.9		2.1		1.8		1.9
General and administrative		2.2		1.9		1.8		2.3
Depreciation and amortization		0.3		0.3		0.4		0.3
Total costs and expenses		9.2		9.3		9.0		9.3

Operating income		1.9		3.6		2.4		1.9

Hub Group’s salaries and benefits ~~expense~~ increased to ~~$137.3~~$114.1 million in ~~2017~~2018 from ~~$130.1~~$88.2 million in ~~2016.~~2017. As a percentage of revenue, salaries and benefits ~~decreased~~increased to 5.0% in 2018 from 4.8% in 2017 ~~from 5.0% in 2016~~.

The Hub segment ~~salaries and benefits expense~~ increase of ~~$8.2~~$24.7 million to ~~$126.9~~$105.9 million in 2018 from $81.2 million in 2017 ~~from $118.7 million in 2016~~ was due primarily to the ~~acquisition~~addition of HGD employees, increases of $9.6 million in employee bonus expense, restricted stock compensation of $1.8 million, $1.4 million related to increases in commissions and ~~an increase in salaries expense~~payroll taxes of ~~$7.9 million, which includes increased severance expense of $2.4~~$1.2 million, partially offset by ~~a decrease in bonus~~lower severance expense ~~of $7.5~~$2.4 million.

Mode’s salaries and benefits expense ~~decreased~~increased to ~~$10.5~~$8.2 million in ~~2017~~2018 from ~~$11.4~~$7.1 million in ~~2016.~~2017. The ~~decrease~~increase was ~~due~~related primarily to ~~decreases of $0.7 million related to~~higher employee bonus ~~expense and $0.1 million related to both salaries expense and employee benefits~~ expense.

Hub Group’s agent fees and commissions ~~expense decreased~~expenses increased to ~~$54.1~~$41.1 million in ~~2017~~2018 from ~~$54.3~~$35.0 million in ~~2016.~~2017. As a percentage of revenue, these expenses decreased to ~~1.9~~1.8% in ~~2017~~2018 from ~~2.1%~~1.9% in ~~2016.~~2017.

The Mode segment agent fees and commissions ~~expense decrease~~increase of ~~$0.2~~$6.1 million was due primarily to the ~~decrease~~increase in Mode’s gross margin.

Hub Group’s general and administrative ~~expense increased~~expenses decreased to ~~$63.3~~$40.7 million in ~~2017~~2018 from ~~$50.4~~$40.9 million in ~~2016.~~2017. As a percentage of revenue, these expenses ~~increased~~decreased to ~~2.2%~~1.8% in ~~2017~~2018 from ~~1.9%~~2.3% in ~~2016.~~2017.

The Hub segment ~~increase~~decrease in general and administrative expense to ~~$57.3~~$36.2 million in ~~2017~~2018 from ~~$44.9~~$36.8 million in ~~2016~~2017 was due primarily to the ~~acquisition of HGD and increases in~~ ~~IT consulting and professional service expense of $4.0~~$3.6 million ~~expenses~~fair value adjustment related to ~~due diligence and~~the Estenson Logistics, LLC acquisition ~~costs~~(see Note 5 “Fair Value Measurement”), decreases in professional services of ~~$2.1~~$1.3 million, ~~increased IT maintenance expense~~decreases in travel expenses of ~~$1.0~~$1.2 million,~~, additional losses~~ increase on the gain on sale of ~~fixed assets in 2017 of $0.6 million,~~ ~~expenses related to a network optimization study of $0.6 million in 2017, increases in temporary labor expense of $0.5 million, bad debt~~equipment and ~~rent~~insurance expense of $0.4 million each, ~~meals and entertainment and equipment lease expense of $0.3 million each,~~ partially offset by ~~a decrease in outside sales commissions~~the general and ~~office expense~~administrative expenses of ~~$0.3 million each.~~HGD.

Mode’s general and administrative ~~expense~~expenses increased to ~~$6.0~~$4.6 million in ~~2017~~2018 from ~~$5.5~~$4.1 million in ~~2016.~~2017. The increase was primarily due ~~primarily~~ to ~~an increase~~increases in ~~IT consulting expense~~professional services of ~~$0.4~~$0.8 million and increases in IT maintenance expense of ~~$0.2~~$0.4 million, partially offset by a decrease in ~~travel and entertainment~~bad debt expense of ~~$0.1~~$0.4 million. and a decrease in gross receipt taxes of $0.3 million.

Hub Group’s depreciation and amortization ~~expense~~ increased to ~~$9.2~~$8.0 million in ~~2017~~2018 from ~~$6.6~~$5.0 million in ~~2016.~~2017. This expense as a percentage of revenue ~~remained consistent at~~increased to 0.4% in 2018 from 0.3% in ~~both 2017 and 2016.~~2017.

The Hub segment’s depreciation ~~and amortization~~ expense increased to ~~$8.3~~$7.5 million in ~~2017~~2018 from ~~$5.6~~$4.4 million in ~~2016.~~2017. This increase was related primarily to addition of depreciation and amortization due to the ~~amortization~~addition of ~~the HGD~~ ~~trade name and customer relationships~~ ~~as well as depreciation of additional~~ ~~computer software~~.HGD.

Mode’s depreciation ~~and amortization expense~~ decreased to ~~$0.9~~$0.5 million in ~~2017~~2018 from ~~$1.0~~$0.6 million in ~~2016.~~2017.

Total other expense increased to ~~$3.5~~$4.5 million in 2018 from $1.6 million in 2017 ~~from $1.2 million in 2016~~ due ~~primarily~~ to ~~the acquisition of HGD,~~ an increase in interest expense related to our ~~equipment~~tractor, trailer and container debt ~~and by less foreign currency translation gains in 2017~~.including the acquisition of HGD.

The provision for income taxes ~~decreased~~increased to ~~$16.7~~$12.4 million in 2018 from $12.3 million in 2017, while the effective tax rate decreased to 24.5% from ~~$35.2 million in 2016. Our effective rate was~~ ~~32.2% in 201~~7 ~~and~~ ~~38.4% in 201~~638.2%. The ~~2017~~provision for income taxes increased primarily due to higher pre-tax income in 2018, while the 2018 effective tax rate was lower primarily due to ~~claiming a deduction for domestic production activities incurred during~~ the ~~2013, 2016,~~enactment of the U.S. Tax Cuts and Jobs Act (the “Act”) on December 22, 2017, ~~tax years.~~ ~~We expect our effective~~which reduced the U.S. federal corporate tax rate ~~for the 201~~7 ~~year~~from 35% to be ~~between 32.0% and~~21%. 3~~3.0~~%.

Net income ~~decreased~~increased to ~~$35.2~~$38.2 million in 2018 from $19.9 million in 2017 ~~from $56.6 million in 2016~~ due primarily to ~~decreased~~increased margin, ~~higher operating expenses and interest expense,~~ partially offset by ~~lower income tax expense in 2017. All of the above are inclusive of the HGD acquisition.~~higher operating expenses.

During the first ~~nine months~~half of ~~2017,~~2018, we funded operations, capital expenditures, ~~an acquisition,~~ capital leases, repayments of debt and stock buy backs related to employee withholding upon vesting of restricted stock through cash flows from operations, proceeds from the issuance of long-term debt and cash on hand. We believe that our cash, cash flows from operations and borrowings available under our Credit Agreement will be sufficient to meet our cash needs for at least the next twelve months.

Cash provided by operating activities for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 was approximately ~~$87.1~~$97.6 million, which resulted primarily from income of ~~$35.2~~$38.2 million adjusted for non-cash charges of ~~$71.3~~$53.3 million and a ~~decrease~~change in operating assets and liabilities of ~~$19.3~~$6.1 million.

Cash provided by operating activities increased ~~$8.1~~$34.5 million in ~~2017~~2018 versus ~~2016.~~2017. The increase was due to anthe increase in net income of $18.3 million and increases in non-cash charges of ~~$20.0~~$15.1 million ~~resulting primarily from increased depreciation~~ and ~~amortization expense and an increase in~~ operating assets and liabilities of ~~$9.5 million due to the timing of customer and vendor payments in 2017 versus 2016. These increases were partially offset by a decrease in net income of $21.4~~$1.1 million in ~~2017.~~2018.

Net cash used in investing activities for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 was ~~$202.8 million. Acquisition payments related to HGD were $165.9~~$68.0 million. Capital expenditures of ~~$39.9~~$69.3 million related primarily to ~~containers~~tractors of ~~$14.6~~$41.7 million, trailers of $12.3 million, other transportation equipment of $0.5 million, technology investments of ~~$14.5~~$11.6 million, ~~transportation equipment~~containers of ~~$7.6~~$2.9 million and the remainder for leasehold improvements.

In ~~2017,~~2018, we placed an order for 3,670 containers and we expect to ~~purchase 2,550~~receive 5,000 containers in 2018 which will be financed with debt. As ofthe date of this report, we had already received ~~2,156~~approximately 1,246 of the containers. We are also investing in technology projects including transportation management systems and ~~satellite tracking.~~an enterprise resource planning system.

We estimate our capital expenditures will range from ~~$80~~$200 million to ~~$85~~$220 million for the year.

Net cash used in investing activities for the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 was ~~$58.3~~$27.2 million. The net cash used in investing activities increased ~~$144.5~~$40.8 million in ~~2017~~2018 from ~~2016~~2017 and was due primarily to ~~the acquisition of~~tractors and trailers predominantly for our HGD business and technology ~~investments.~~investments, partially offset by lower container purchases in 2018.

The net cash ~~provided by~~used in financing activities for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 was ~~$6.8~~$31.4 million, which resulted from ~~proceeds from the issuance of debt of $73.6 million, partially offset by~~ the repayment of long-term debt of ~~$59.9~~$84.1 million, stock tendered for payments of withholding taxes of ~~$3.4~~$4.0 million and capital lease payments of ~~$2.1~~$1.5 million, ~~and payment~~partially offset by proceeds from the issuance of debt ~~issuance costs~~ of ~~$1.4~~$58.2 million.

The increase in net cash ~~provided by~~used in financing activities of ~~$100.0~~$19.7 million from ~~2016 to~~2018 versus 2017 is primarily due to ~~a decrease~~the increase in the ~~purchases~~repayments of ~~treasury~~long term debt of $60.9 million, stock tendered for payments of ~~$100.0~~withholding taxes of $0.7 million and capital lease payments of $0.1 million, partially offset by the proceeds from the issuance of debt of $42.0 million.

In ~~2017,~~2018, we expect our cash paid for taxes to be ~~significantly~~ less than ~~2016~~2017 and much lower than our income tax expense because of ~~lower pretax income and large~~significant favorable timing differences ~~between~~related to depreciation due to the ~~2017 tax depreciation and financial statement depreciation.~~enactment of the Act on December 22, 2017.

We have standby letters of credit that expire at various dates in ~~2017~~2018 and ~~2018.~~2019. As of ~~September~~June 30, ~~2017,~~2018, our letters of credit were ~~$13.5~~$23.0 million.

Our unused and available borrowings under our ~~new Credit Agreement~~bank revolving line of credit were ~~$286.5~~$327.0 million as of ~~September~~June 30, ~~2017. Our unused~~2018 and ~~available borrowings under the 2013 Credit Agreement were $38.2~~$284.9 million as of December 31, ~~2016.~~2017. We were in compliance with our debt covenants as of ~~September~~June 30, ~~2017.~~2018.

We are exposed to market risk related to changes in interest rates on our bank line of credit which may adversely affect our results of operations and financial condition. Although we conduct business in foreign countries, international operations are not material to our consolidated financial position, results of operations, or cash flows. Additionally, foreign currency transaction gains and losses were not material to our results of operations for the ~~nine~~six months ended ~~September~~June 30, ~~2017.~~2018. Accordingly, we are not currently subject to material foreign currency exchange rate risks from the effects that exchange rate movements of foreign currencies would have on our future costs or on future cash flows we would receive from our foreign investment. To date, we have not entered into any

foreign currency forward exchange contracts or other derivative financial instruments to hedge the effects of adverse fluctuations in foreign currency exchange rates. We do not use financial instruments for trading purposes.

We have both fixed and variable rate debt as described in Note 6 to the unaudited consolidated financial statements. Any material increase in market interest rates would not have a material impact on the results of operations for the ~~quarter~~six months ended ~~September~~June 30, ~~2017.~~2018.

As of ~~September~~June 30, ~~2017, other than our outstanding letters of credit,~~2018, we had ~~$50.0 million of outstanding obligations~~no borrowings under our bank revolving line of credit ~~arrangement.~~and our unused and available borrowings were $327.0 million. As of December 31, ~~2016, other than our outstanding letters of credit,~~2017, we had ~~no outstanding obligations~~$45.0 million of borrowings under our bank revolving line of credit ~~arrangement.~~

As of ~~September~~June 30, ~~2017,~~2018, an evaluation was carried out under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures. Based upon this evaluation, the Chief Executive Officer and Chief Financial Officer concluded that these disclosure controls and procedures were effective as of ~~September~~June 30, ~~2017. Except as noted below, there~~2018. There have been no changes in our internal control over financial reporting identified in connection with such evaluation that occurred during the last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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

During the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2018, there have been no material developments from the legal proceedings disclosed in our Annual Report on Form 10-K for our fiscal year ended December 31, ~~2016,~~2017, except those disclosed in Note 8 to the unaudited consolidated financial statements under “Legal Matters,” which is incorporated herein by reference.

During the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2018, there have been no material changes from the risk factors disclosed in our Annual Report on Form 10-K for our year ended December 31, ~~2016.~~2017, except for the following:

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

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

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

We do not currently have a share repurchase plan in place. During the ~~third~~second quarter of ~~2017,~~2018, we purchased ~~3,058~~2,775 shares at a weighted average price of ~~$38.50~~$44.36 per share related to employee withholding upon vesting of restricted stock.

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

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.


	Page
PART I. Financial Information:
Consolidated Balance Sheets – ~~September~~June 30, ~~2017~~2018 (unaudited) and December 31, ~~2016~~2017	43
Unaudited Consolidated Statements of Income and Comprehensive Income – Three Months and ~~Nine~~Six Months Ended ~~September~~June 30, ~~2017~~2018 and ~~2016~~2017	54
Unaudited Consolidated Statements of Cash Flows – ~~Nine~~Six Months Ended ~~September~~June 30, ~~2017~~2018 and ~~2016~~2017	65
Notes to Unaudited Consolidated Financial Statements	76
Management’s Discussion and Analysis of Financial Condition and Results of Operations	1714
Quantitative and Qualitative Disclosures about Market Risk	2622
Controls and Procedures	2623
PART II. Other Information	2623


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

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

Remainder 2017	$	1,100
2018		4,400
2019		4,400
2020		4,400
2021		4,400

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

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

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

Total consideration	$	172,014

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

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

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


Revolving line of credit	$	50,000		$	-

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

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

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

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

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

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

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

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

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


Exhibit No.	Description

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

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

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

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

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

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

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

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

101	The following financial statements and footnotes from the Hub Group Quarterly Report on Form 10-Q for the quarter ended ~~September~~June 30, ~~2017~~2018 formatted in XBRL: (i) Consolidated Balance Sheets; (ii) Unaudited Consolidated Statements of Income and Other Comprehensive Income; (iii) Unaudited Consolidated Statements of Cash Flows; and (iv) Notes to Unaudited Consolidated Financial Statements.


		HUB GROUP, INC.

DATE:	~~January 5,~~August 03, 2018	/s/ Terri A. Pizzuto
		Terri A. Pizzuto
		Executive Vice President, Chief Financial
		Officer and Treasurer
		(Principal Financial Officer)