NOTE 3.

Business Segments

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

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

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

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

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

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

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

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

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

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

	Three Months									Three Months
	Ended September 30, 2017									Ended September 30, 2016
					Inter-			Hub						Inter-			Hub
					Segment			Group						Segment			Group
	Hub		Mode		Elims			Total		Hub		Mode		Elims			Total
Intermodal	$	473,998	$	123,194	$	(13,665	)	$	583,527	$	466,283	$	126,052	$	(21,857	)	$	570,478
Truck brokerage		113,179		87,242		(634	)		199,787		96,906		79,627		(174	)		176,359
Logistics		175,679		48,260		(10,794	)		213,145		153,510		45,932		(13,465	)		185,977
Dedicated		57,946		-		(45	)		57,901		-		-		-			-
Total revenue	$	820,802	$	258,696	$	(25,138	)	$	1,054,360	$	716,699	$	251,611	$	(35,496	)	$	932,814

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

	Nine Months									Nine Months
	Ended September 30, 2017									Ended September 30, 2016
					Inter-			Hub						Inter-			Hub
					Segment			Group						Segment			Group
	Hub		Mode		Elims			Total		Hub		Mode		Elims			Total
Revenue	$	2,203,142	$	743,621	$	(74,442	)	$	2,872,321	$	1,980,450	$	692,366	$	(78,586	)	$	2,594,230
Transportation costs		1,972,725		654,612		(74,442	)		2,552,895		1,739,676		598,809		(78,586	)		2,259,899
Gross margin		230,417		89,009		-			319,426		240,774		93,557		-			334,331

Costs and expenses:
Salaries and benefits		126,891		10,452		-			137,343		118,658		11,417		-			130,075
Agent fees and commissions		46		54,057		-			54,103		47		54,287		-			54,334
General and administrative		57,330		6,011		-			63,341		44,917		5,451		-			50,368
Depreciation and amortization		8,319		896		-			9,215		5,603		956		-			6,559
Total costs and expenses		192,586		71,416		-			264,002		169,225		72,111		-			241,336

Operating income	$	37,831	$	17,593	$	-		$	55,424	$	71,549	$	21,446	$	-		$	92,995

Capital Expenditures	$	39,732	$	204	$	-		$	39,936	$	59,356	$	527	$	-		$	59,883

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

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

	Nine Months									Nine Months
	Ended September 30, 2017									Ended September 30, 2016
					Inter-			Hub						Inter-			Hub
					Segment			Group						Segment			Group
	Hub		Mode		Elims			Total		Hub		Mode		Elims			Total
Intermodal	$	1,350,187	$	357,516	$	(41,768	)	$	1,665,935	$	1,318,223	$	355,379	$	(61,974	)	$	1,611,628
Truck brokerage		324,823		248,311		(1,330	)		571,804		261,456		228,350		(676	)		489,130
Logistics		470,186		137,794		(31,299	)		576,681		400,771		108,637		(15,936	)		493,472
Dedicated		57,946		-		(45	)		57,901		-		-		-			-
Total revenue	$	2,203,142	$	743,621	$	(74,442	)	$	2,872,321	$	1,980,450	$	692,366	$	(78,586	)	$	2,594,230