Hub Group
Annual Report 2010

Plain-text annual report

Table of Contents UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549 FORM 10-K (Mark One)xAnnual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934For the fiscal year ended December 31, 2010OR ¨Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934Commission File No. 0-27754 HUB GROUP, INC.(Exact name of registrant as specified in its charter) Delaware 36-4007085(State or other jurisdiction ofincorporation of organization) (I.R.S. EmployerIdentification No.)3050 Highland Parkway, Suite 100Downers Grove, Illinois 60515(Address and zip code of principal executive offices)(630) 271-3600(Registrant’s telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: NoneSecurities registered pursuant to Section 12(g) of the Act:Class A Common Stock, $.01 par value(Title of Class) Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes x No ¨Indicate by check mark if Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No xIndicate 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 1934during 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 filingrequirements for the past 90 days. Yes x 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 tobe submitted and posted pursuant to Rule 405 of Regulation S-T (§ 229.405 of this chapter) during the preceding 12 months (or for such shorter period thatthe registrant was required to submit and post such files). Yes x No ¨Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the bestof Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form10-K. xIndicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. Seedefinitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one): Large Accelerated Filer x Accelerated Filer ¨Non-Accelerated Filer ¨ Smaller Reporting Company ¨Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No xThe aggregate market value of the Registrant’s voting stock held by non-affiliates on June 30, 2010, based upon the last reported sale price on that date on theNASDAQ Global Select Market of $30.01 per share, was $1,067,564,036.On February 18, 2011, the Registrant had 36,818,672 outstanding shares of Class A Common Stock, par value $.01 per share, and 662,296 outstandingshares of Class B Common Stock, par value $.01 per share. Documents Incorporated by ReferenceThe Registrant’s definitive Proxy Statement for the Annual Meeting of Stockholders to be held on May 6, 2011 (the “Proxy Statement”) is incorporated byreference in Part III of this Form 10-K to the extent stated herein. Except with respect to information specifically incorporated by reference in this Form 10-K,the Proxy Statement is not deemed to be filed as a part hereof. Table of ContentsPART I Item 1.BUSINESSGeneralHub Group, Inc. (“Company”, “we”, “us” or “our”) is a Delaware corporation that was incorporated on March 8, 1995. We are one of North America’sleading asset-light freight transportation management companies. We offer comprehensive intermodal, truck brokerage and logistics services. Since ourfounding in 1971, we have grown to become the largest intermodal marketing company (“IMC”) in the United States and one of the largest truck brokers.We operate through a network of operating centers throughout the United States, Canada and Mexico. Each operating center is strategically located in amarket with a significant concentration of shipping customers and one or more railheads. Through our network, we have the ability to move freight in and outof every major city in the United States, Canada and Mexico. We service a large and diversified customer base in a broad range of industries, includingconsumer products, retail and durable goods. We utilize an asset-light strategy in order to minimize our investment in equipment and facilities and reduce ourcapital requirements. We arrange freight movement for our customers through transportation carriers and equipment providers.Services ProvidedOur transportation services can be broadly placed into the following categories:Intermodal. As an IMC, we arrange for the movement of our customers’ freight in containers and trailers, typically over long distances of 750 miles ormore. We contract with railroads to provide transportation for the long-haul portion of the shipment and with local trucking companies, known as “drayagecompanies,” 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.We use our network to access containers and trailers owned by leasing companies, railroads and steamship lines. We are able to track trailers andcontainers entering a service area and reuse that equipment to fulfill the customers’ outbound shipping requirements. This effectively allows us to “capture”containers and trailers and keep them within our network. As of February 1, 2011, we have exclusive access to approximately 9,600 rail-owned containers forour dedicated use on the Union Pacific (“UP”) and the Norfolk Southern (“NS”) rails. In addition to these rail-owned containers, as of February 1, 2011, wehad a total of 8,702 53’ private containers for use on the UP and NS. We financed 6,194 of these containers with operating leases and we own 2,508containers. These financing arrangements are included in Note 8 to the consolidated financial statements.As of February 1, 2011, approximately half of our drayage needs were met by our subsidiary, Comtrak Logistics, Inc. (“Comtrak”), which assists usin providing reliable, cost effective intermodal services to our customers. Comtrak has terminals in Atlanta, Birmingham, Charleston, Charlotte,Chattanooga, Chicago, Cleveland, Columbus (OH), Dallas, Harrisburg, Huntsville, Indianapolis, Jacksonville, Kansas City, Milwaukee, Memphis,Nashville, Los Angeles, Perry (FL), Philadelphia, Savannah, St. Louis, Stockton, and Titusville (FL). As of February 1, 2011, Comtrak owned 283tractors, leased or owned 502 trailers, employed 267 drivers and contracted with 1,414 owner-operators.Truck Brokerage (Highway Services). We are one of the largest truck brokers in the United States, providing customers with another option for theirtransportation needs. We match the customers’ needs with carriers’ capacity to provide the most effective service and price combinations. We have contractswith 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, trackshipments in transit and handle claims for freight loss and damage on behalf of our customers.Our truck brokerage operation also provides customers with specialized programs. Through the Dedicated Trucking Program, certain carriers haveinformally agreed to move freight for our customers on a continuous basis. This arrangement allows us to effectively meet our customers’ needs withoutowning the equipment.Logistics. Our logistics business operates under the name of Unyson Logistics. Unyson Logistics is comprised of a network of logistics professionalsdedicated to developing, implementing and operating customized logistics solutions. Unyson offers a wide range of transportation management services andtechnology solutions including shipment optimization, load consolidation, mode selection, carrier management, load planning and execution and web-basedshipment visibility. Our multi-modal transportation capabilities include small parcel, heavyweight, expedited, less-than-truckload, truckload, intermodal andrailcar. Unyson Logistics operates throughout North America, providing operations through its main operating location in St. Louis with additional supportlocations in Boston, Chicago, Cleveland and Minneapolis. 1Table of ContentsHub NetworkOur entire network is interactively connected through our proprietary Network Management System. This enables us to move freight into and out ofevery major city in the United States, Canada and Mexico.In a typical intermodal transaction, the customer contacts one of our intermodal operating centers to place an order. The operating center consults with thecentralized pricing group, obtains the necessary intermodal equipment, arranges for it to be delivered to the customer by a drayage company and, after thefreight is loaded, arranges for the transportation of the container or trailer to the rail ramp. Relevant information is entered into our Network ManagementSystem by the assigned operating center. Our predictive track and trace technology then monitors the shipment to ensure that it arrives as scheduled and alertsthe customer service personnel if there are service delays. The assigned operating center then arranges for and confirms delivery by a drayage company atdestination. After unloading, the empty equipment is made available for reloading by the operating center for the delivery market.We provide truck brokerage services to our customers in a similar manner. In a typical truck brokerage transaction, the customer contacts one of ourhighway operating centers to obtain a price quote for a particular freight movement. The customer then provides appropriate shipping information to theoperating center. The operating center makes the delivery appointment and arranges with the appropriate carrier to pick up the freight. Once it receivesconfirmation that the freight has been picked up, the operating center monitors the movement of the freight until it reaches its destination and the delivery hasbeen confirmed. If the carrier notifies us that after delivering the load it will need additional freight, we may notify the operating center located nearest thedestination of the carrier’s availability. Although under no obligation to do so, that operating center then may attempt to secure additional freight for the carrier.Marketing and CustomersWe believe that fostering long-term customer relationships is critical to our success. Through these long-term relationships, we are able to betterunderstand our customers’ needs and tailor our transportation services to the specific customer, regardless of the customer’s size or volume. We currently havefull-time marketing representatives at various operating centers and sales offices with primary responsibility for servicing local, regional and nationalaccounts. These sales representatives directly or indirectly report to our Chief Marketing Officer. This model allows us to provide our customers with both alocal marketing contact and access to our competitive rates as a result of being a large, national transportation service provider.Our marketing efforts have produced a large, diverse customer base, with no one customer representing more than 10% of our total revenue in 2010. Weservice customers in a wide variety of industries, including consumer products, retail and durable goods.Management Information SystemsA primary component of our business strategy is the continued improvement of our Network Management System and other technology to ensure thatwe remain a leader among transportation providers in information processing for transportation services. Our Network Management System consists ofproprietary software running on a combination of platforms which includes the IBM iSeries and Microsoft Windows Server environments located at a secureoffsite data center. All of our operating centers are linked together with the data center using an MPLS (“Multi-Protocol Label Switching”) network. Thisconfiguration provides a real time environment for transmitting data among our operating centers and headquarters. We also make extensive use of electroniccommerce (“e-Commerce”), allowing each operating center to communicate electronically with each railroad, many drayage companies, certain truckingcompanies and those customers with e-Commerce capabilities.Our Network Management System is the primary mechanism used in our operating centers to handle our intermodal and truck brokerage business. TheNetwork Management System processes customer transportation requests, tenders and tracks shipments, prepares customer billing, establishes accountprofiles and retains critical information for analysis. The Network Management System provides connectivity with each of the major rail carriers. Thisenables us to electronically tender and track shipments in a real time environment. In addition, the Network Management System’s e-Commerce features offercustomers with e-Commerce capability a completely paperless process, including load tendering, shipment tracking, billing and remittance processing. Weaggressively pursue opportunities to establish e-Commerce interfaces with our customers, railroads, trucking companies and drayage companies.To manage our logistics business, we use specialized software that includes planning and execution solutions. This sophisticated transportationmanagement software enables us to offer supply chain planning and logistics managing, modeling, optimizing and monitoring for our customers. We use thissoftware when offering logistics management services to customers that ship via multiple modes, including intermodal, truckload, and less-than-truckload,allowing us to optimize mode and carrier selection and routing for our customers. This software is integrated with Hub Group’s Network Management Systemand our accounting system.Our website, www.hubgroup.com, is designed to allow our customers and vendors to easily do business with us online. Through Vendor Interface, wetender loads to our drayage partners using the Internet rather than phones or faxes. Vendor Interface also captures event status information, allows vendors toview outstanding paperwork requirements and helps facilitate paperless invoicing. We currently tender substantially all of our drayage loads using VendorInterface or e-Commerce. Through Trucker Advantage, we exchange information on available Hub loads, available carrier capacity and updates to event statusinformation with our truck brokerage partners. Through Customer Advantage, customers receive immediate pricing, place orders, track shipments, andreview historical shipping data through a variety of reports over the Internet. All of our Internet applications are integrated with the Network ManagementSystem. 2Table of ContentsRelationship with RailroadsA key element of our business strategy is to strengthen our close working relationship with the major intermodal railroads in the United States. We viewour relationship with the railroads as a partnership. Due to our size and relative importance, some railroads have dedicated support personnel to focus on ourday-to-day service requirements. On a regular basis, our senior executives and each of the railroads meet to discuss major strategic issues concerningintermodal transportation.We have relationships with each of the following major railroads: Canadian National Kansas City SouthernCanadian Pacific Norfolk SouthernCSX Union PacificWe also have relationships with each of the following major service providers: CMA CGM (America) Inc., Express System Intermodal Inc., HanjinShipping, Hyundai Merchant Marine, K-Line America, Maersk Sea-Land and Mitsui O.S.K. Lines (America) Inc.Transportation rates are market driven. We sometimes negotiate with the railroads or other major service providers on a route or customer specific basis.Consistent with industry practice, some of the rates we negotiate are special commodity quotations (“SCQs”), which provide discounts from published pricelists based on competitive market factors and are designed by the railroads or major service providers to attract new business or to retain existing business.SCQ rates are generally issued for the account of a single IMC. SCQ rates apply to specific customers in specified shipping lanes for a specific period oftime, usually up to 12 months.Relationship with Drayage CompaniesWe have a “Quality Drayage Program,” which consists of agreements and rules that govern the framework by which many drayage companies performservices for us. Participants in the program commit to provide high quality service along with clean and safe equipment, maintain a defined on-timeperformance level and follow specified procedures designed to minimize freight loss and damage. We negotiate drayage rates for transportation between specificorigin and destination points.We also provide drayage services with our own drayage operations, which we operate through our subsidiary Comtrak. Our drayage operations employtheir own drivers and also contract with owner-operators who supply their own trucks.Relationship with Trucking CompaniesOur truck brokerage operation has a large number of active trucking companies that we use to transport freight. The local operating centers deal dailywith these carriers on an operational level. Our corporate headquarters handles the administrative and regulatory aspects of the trucking company relationship.Our relationships with these trucking companies are important since these relationships determine pricing, load coverage and overall service.Risk Management and InsuranceWe require all drayage companies participating in the Quality Drayage Program to carry at least $1.0 million in general liability insurance, $1.0 millionin truckman’s auto liability insurance and a minimum of $100,000 in cargo insurance. Railroads, which are self-insured, provide limited cargo protection,generally up to $250,000 per shipment. To cover freight loss or damage when a carrier’s liability cannot be established or a carrier’s insurance is insufficientto cover the claim, we carry our own cargo insurance with a limit of $1.0 million per container or trailer and a limit of $20.0 million in the aggregate. We alsocarry general liability insurance with limits of $1.0 million per occurrence and $2.0 million in the aggregate with a companion $50.0 million umbrella policyon this general liability insurance.We maintain separate insurance policies to cover potential exposure from our company-owned drayage operations. We carry commercial general liabilityinsurance with a limit of $1.0 million per occurrence, subject to a $2.0 million policy aggregate limit, and trucker’s automobile liability insurance with a limitof $1.0 million per occurrence. Additionally, we have an umbrella excess liability policy with a limit of $19.0 million. We also maintain motor truck cargoliability insurance with a limit of $1.0 million per occurrence.Government RegulationHub Group, Inc. and various subsidiaries are licensed by the Department of Transportation as brokers in arranging for the transportation of generalcommodities by motor vehicle. To the extent that the operating centers perform truck brokerage services, they do so under these licenses. The Department ofTransportation prescribes qualifications for acting in this capacity, including a $10,000 surety bond that we have posted. To date, compliance with theseregulations has not had a material adverse effect on our results of operations or financial condition. However, the transportation industry is subject tolegislative or regulatory changes that can affect the economics of the industry by requiring changes in operating practices or influencing the demand for, andcost of providing, transportation services. 3Table of ContentsCompetitionThe transportation services industry is highly competitive. We compete against other IMCs, as well as logistics companies, third party brokers,trucking companies and railroads that market their own intermodal services. Several larger trucking companies have entered into agreements with railroads tomarket intermodal services nationwide. Competition is based primarily on freight rates, quality of service, reliability, transit time and scope of operations.Several transportation service companies and trucking companies, and all of the major railroads, have substantially greater financial and other resources thanwe do.GeneralEmployees: As of December 31, 2010, we had 1,392 employees or 1,123 employees excluding drivers. We are not a party to any collective bargainingagreement and consider our relationship with our employees to be satisfactory.Other: No material portion of our operations is subject to renegotiation of profits or termination of contracts at the election of the federal government.None of our trademarks are believed to be material to us. Our business is seasonal to the extent that certain customer groups, such as retail, are seasonal.Periodic ReportsUpon written request, our annual report to the Securities and Exchange Commission on Form 10-K for the fiscal year ended December 31, 2010, ourquarterly reports on Form 10-Q and current reports on Form 8-K will be furnished to stockholders free of charge; write to: Public Relations Department, HubGroup, Inc., 3050 Highland Parkway, Suite 100, Downers Grove, Illinois 60515. Our filings are also accessible through our website at www.hubgroup.comas soon as reasonably practicable after we file or furnish such reports to the Securities and Exchange Commission. Item 1A.RISK FACTORSBecause our business is concentrated on intermodal marketing, any decrease in demand for intermodal transportation services compared to othertransportation services could have an adverse effect on our results of operations.We derived 70% of our revenue from our intermodal services in 2010 and 2009 as compared to 71% in 2008. As a result, any decrease in demand forintermodal transportation services compared to other transportation services could have an adverse effect on our results of operations.Because we depend on railroads for our operations, our operating results and financial condition are likely to be adversely affected by anyreduction or deterioration in rail service.We depend on the major railroads in the United States for virtually all of the intermodal services we provide. In many markets, rail service is limited toone or a few railroads. Consequently, a reduction in, or elimination of, rail service to a particular market is likely to adversely affect our ability to provideintermodal transportation services to some of our customers. In addition, the railroads are relatively free to adjust shipping rates up or down as marketconditions permit. Rate increases would result in higher intermodal transportation costs, reducing the attractiveness of intermodal transportation compared totruck or other transportation modes, which could cause a decrease in demand for our services. Further, our ability to continue to expand our intermodaltransportation business is dependent upon the railroads’ ability to increase capacity for intermodal freight and provide consistent service. Our business couldalso be adversely affected by a work stoppage at one or more railroads or by adverse weather conditions or other factors that hinder the railroads’ ability toprovide reliable transportation services. In the past, there have been service issues when railroads have merged. As a result, we cannot predict what effect, ifany, further consolidation among railroads may have on intermodal transportation services or our results of operations.Because our relationships with the major railroads are critical to our ability to provide intermodal transportation services, our business may beadversely affected by any change to those relationships.We have important relationships with certain major U.S. railroads. To date, the railroads have chosen to rely on us, other IMCs and other intermodalcompetitors to market their intermodal services rather than fully developing their own marketing capabilities. If one or more of the major railroads were todecide to reduce their dependence on us, the volume of intermodal shipments we arrange would likely decline, which could adversely affect our results ofoperations and financial condition. 4Table of ContentsBecause we rely on drayage companies in our intermodal operations, our ability to expand our business or maintain our profitability may beadversely affected by a shortage of drayage capacity.In certain markets we serve, we use third-party drayage companies for pickup and delivery of intermodal containers. Most drayage companies operaterelatively small fleets and have limited access to capital for fleet expansion. In some of our markets, there are a limited number of drayage companies that canmeet our quality standards. This could limit our ability to expand our intermodal business or require us to establish more of our own drayage operations insome markets, which could increase our operating costs and could adversely affect our profitability and financial condition. Also, the trucking industrychronically experiences a shortage of available drivers, which may limit the ability of third-party drayage companies to expand their fleets. This shortage alsomay require them to increase drivers’ compensation, thereby increasing our cost of providing drayage services to our customers. Therefore, the driver shortagecould also adversely affect our profitability and limit our ability to expand our intermodal business.Because we depend on trucking companies for our truck brokerage services, our ability to maintain or expand our truck brokerage businessmay be adversely affected by a shortage of trucking capacity.We derived 18% of our revenue from our truck brokerage services in 2010 as compared to 19% in 2009 and 20% in 2008. We depend upon variousthird-party trucking companies for the transportation of our customers’ loads. Particularly during periods of economic expansion, trucking companies may beunable to expand their fleets due to capital constraints or chronic driver shortages, and these trucking companies also may raise their rates. If we faceinsufficient capacity among our third-party trucking companies, we may be unable to maintain or expand our truck brokerage business. Also, we may beunable to pass rate increases on to our customers, which could adversely affect our profitability.Because we use a significant number of independent contractors, such as owner operators, in our businesses, proposals from legislative, judicialor regulatory authorities that change the independent contractor classification could have a significant impact on our gross margin and operatingincome.We use a significant number of independent contractors, such as owner operators, in our businesses, consistent with long-standing industry practices.There can be no assurance that legislative, judicial, or regulatory (including tax) authorities will not introduce proposals or assert interpretations of existingrules and regulations that would change the independent contractor classification of a significant number of independent contractors doing business with us.The costs associated with potential reclassifications could have a material adverse effect on results of operations and our financial position.We depend on third parties for equipment essential to operate our business, and if we fail to secure sufficient equipment, we could lose customersand revenue.We depend on third parties for transportation equipment, such as containers, chassis and trailers, necessary for the operation of our business. Ourindustry has experienced equipment shortages in the past, particularly during the peak shipping season in the fall. A substantial amount of intermodal freightoriginates at or near the major West Coast ports, which have historically had the most severe equipment shortages. If we cannot secure sufficient transportationequipment at a reasonable price from third parties to meet our customers’ needs, our customers may seek to have their transportation needs met by otherproviders. This could have an adverse effect on our business, results of operations and financial position.Our business could be adversely affected by strikes or work stoppages by draymen, truckers, longshoremen and railroad workers.There has been labor unrest, including work stoppages, among draymen. We could lose business from any significant work stoppage or slowdownand, if labor unrest results in increased rates for draymen, we may not be able to pass these cost increases on to our customers. In the summer of 2008, anowner-operator work stoppage in Northern California caused us to incur an additional $1.0 million in transportation costs. In the fall of 2002, all of the WestCoast ports were shut down as a result of a dispute with the longshoremen. The ports remained closed for nearly two weeks, until reopened as the result of acourt order under the Taft-Hartley Act. Our operations were adversely affected by the shutdown. A new contract was agreed to through 2014 by theInternational Longshoremen and Warehouse Union and the Pacific Maritime Association. In the past several years, there have been strikes involving railroadworkers. Future strikes by railroad workers in the United States, Canada or anywhere else that our customers’ freight travels by railroad could adverselyaffect our business and results of operations. Any significant work stoppage, slowdown or other disruption involving ports, railroads, truckers or draymencould adversely affect our business and results of operations.Our results of operations are susceptible to changes in general economic conditions and cyclical fluctuations.Economic recession, customers’ business cycles, changes in fuel prices and supply, interest rate fluctuations, increases in fuel or energy taxes and othergeneral economic factors affect the demand for transportation services and the operating costs of railroads, trucking companies and drayage companies. Wehave little or no control over any of these factors or their effects on the transportation industry. Increases in the operating costs of railroads, trucking companiesor drayage companies can be expected to result in higher 5Table of Contentsfreight rates. Our operating margins could be adversely affected if we were unable to pass through to our customers the full amount of higher freight rates.Economic recession or a downturn in customers’ business cycles also may have an adverse effect on our results of operations and growth by reducing demandfor our services. Therefore, our results of operations, like the entire freight transportation industry, are cyclical and subject to significant period-to-periodfluctuations.Relatively small increases in our transportation costs that we are unable to pass through to our customers are likely to have a significant effecton our gross margin and operating income.Transportation costs represented 88% of our consolidated revenue in 2010, 88% in 2009 and 87% in 2008. Because transportation costs represent sucha significant portion of our costs, even relatively small increases in these transportation costs, if we are unable to pass them through to our customers, arelikely to have a significant effect on our gross margin and operating income.Our business could be adversely affected by heightened security measures, actual or threatened terrorist attacks, efforts to combat terrorism,military action against a foreign state or other similar event.We cannot predict the effects on our business of heightened security measures, actual or threatened terrorist attacks, efforts to combat terrorism, militaryaction against a foreign state or other similar events. It is possible that one or more of these events could be directed at U.S. or foreign ports, borders, railroadsor highways. Heightened security measures or other events are likely to slow the movement of freight through U.S. or foreign ports, across borders or on U.S.or foreign railroads or highways and could adversely affect our business and results of operations. Any of these events could also negatively affect theeconomy and consumer confidence, which could cause a downturn in the transportation industry.If we fail to maintain and enhance our information technology systems, we may be at a competitive disadvantage and lose customers.Our information technology systems are critical to our operations and our ability to compete effectively as an IMC, truck broker and logistics provider.We expect our customers to continue to demand more sophisticated information technology applications from their suppliers. If we do not continue to enhanceour Network Management System and the logistics software we use to meet the increasing demands of our customers, we may be placed at a competitivedisadvantage and could lose customers.Our information technology systems are subject to risks that we cannot control and the inability to use our information technology systems couldmaterially adversely affect our business.Our information technology systems are dependent upon global communications providers, web browsers, telephone systems and other aspects of theInternet infrastructure that have experienced significant system failures and electrical outages in the past. Our systems are susceptible to outages from fire,floods, power loss, telecommunications failures, break-ins and similar events. Our servers are vulnerable to computer viruses, break-ins and similardisruptions from unauthorized tampering with our computer systems. The occurrence of any of these events could disrupt or damage our informationtechnology systems and inhibit our internal operations, our ability to provide services to our customers and the ability of our customers and vendors to accessour information technology systems. This could result in a loss of customers or a reduction in demand for our services.The transportation industry is subject to government regulation, and regulatory changes could have a material adverse effect on our operatingresults or financial condition.Hub Group, Inc. and various subsidiaries are licensed by the Department of Transportation as motor carrier freight brokers. The Department ofTransportation prescribes qualifications for acting in this capacity, including surety bond requirements. Our Comtrak subsidiary is licensed by theDepartment of Transportation to act as a motor carrier. To date, compliance with these regulations has not had a material adverse effect on our results ofoperations or financial condition. However, the transportation industry is subject to legislative or regulatory changes, including potential limits on carbonemissions under climate change legislation, that can affect the economics of the industry by requiring changes in operating practices or influencing the demandfor, and cost of providing, transportation services. We may become subject to new or more restrictive regulations relating to fuel emissions or limits on vehicleweight and size. Future laws and regulations may be more stringent and require changes in operating practices, influence the demand for transportationservices or increase the cost of providing transportation services, any of which could adversely affect our business and results of operations.We are not able to accurately predict how new governmental laws and regulations, or changes to existing laws and regulations, will affect thetransportation industry generally, or us in particular. Although government regulation that affects us and our competitors may simply result in higher coststhat can be passed to customers, there can be no assurance that this will be the case.Our operations are subject to various environmental laws and regulations, the violation of which could result in substantial fines or penalties.From time to time, we arrange for the movement of hazardous materials at the request of our customers. As a result, we are subject to variousenvironmental laws and regulations relating to the handling of hazardous materials. If we are involved in a spill or other accident involving hazardousmaterials, or if we are found to be in violation of applicable laws or regulations, we could be subject to substantial fines or penalties and to civil and criminalliability, any of which could have an adverse effect on our business and results of operations. 6Table of ContentsWe derive a significant portion of our revenue from our largest customers and the loss of several of these customers could have a materialadverse effect on our revenue and business.Our largest 20 customers accounted for approximately 43%, 40% and 36% of our revenue in 2010, 2009 and 2008, respectively. A reduction in ortermination of our services by several of our largest customers could have a material adverse effect on our revenue and business.Insurance and claims expenses could significantly reduce our earnings.Our future insurance claims expenses might exceed historical levels, which could reduce our earnings. If the number or severity of claims increases, ouroperating results could be adversely affected. We maintain insurance with licensed insurance companies. Our insurance and claims expenses could increasewhen our current coverage expires. If these expenses increase, and we are unable to offset the increase with higher freight rates, our earnings could be materiallyand adversely affected.Our success depends upon our ability to recruit and retain key personnel.Our success depends upon attracting and retaining the services of our management team as well as our ability to attract and retain a sufficient number ofother qualified personnel to run our business. There is substantial competition for qualified personnel in the transportation services industry. As all keypersonnel devote their full time to our business, the loss of any member of our management team or other key person could have an adverse effect on us. We donot have written employment agreements with any of our executive officers and do not maintain key man insurance on any of our executive officers.Our growth could be adversely affected if we are not able to identify, successfully acquire and integrate future acquisition prospects.We believe that future acquisitions and/or the failure to make such acquisitions could significantly impact financial results. Financial results mostlikely to be impacted include, but are not limited to, revenue, gross margin, salaries and benefits, selling general and administrative expenses, depreciation andamortization, interest expense, net income and our debt level.An economic downturn could materially adversely affect our business.Our operations and performance depend significantly on economic conditions. Uncertainty about global economic conditions poses a risk as consumersand businesses may postpone spending in response to tighter credit, negative financial news and/or declines in income or asset values, which could have amaterial negative effect on demand for transportation services. We are unable to predict the likely duration and severity of disruptions in the financial marketsand the adverse global economic conditions, and if the current uncertainty continues or economic conditions further deteriorate, our business and results ofoperations could be materially and adversely affected. Other factors that could influence demand include fluctuations in fuel costs, labor costs, consumerconfidence, and other macroeconomic factors affecting consumer spending behavior. There could be a number of follow-on effects from a credit crisis on ourbusiness, including the insolvency of key transportation providers and the inability of our customers to obtain credit to finance development and/ormanufacture products resulting in a decreased demand for transportation services. Our revenues and gross margins are dependent upon this demand, and ifdemand for transportation services declines, our revenues and gross margins could be adversely affected.Although we believe we have adequate liquidity and capital resources to fund our operations internally our inability to access the capital markets onfavorable terms, or at all, may adversely affect our ability to engage in strategic transactions. The inability to obtain adequate financing from debt or capitalsources could force us to self-fund strategic initiatives or even forgo certain opportunities, which in turn could potentially harm our performance.Uncertainty about global economic conditions could also continue to increase the volatility of our stock price.We are exposed to credit risk and fluctuations in the market values of our investment portfolio.Although we have not recognized any material losses on our cash and cash equivalents, future declines in their market values could have a materialadverse effect on our financial condition and operating results. The value or liquidity of our cash and cash equivalents could decline which could have amaterial adverse effect on our financial condition and operating results. Item 1B.UNRESOLVED STAFF COMMENTSNone. 7Table of ContentsItem 2.PROPERTIESWe directly, or indirectly through our subsidiaries, operate 46 offices throughout the United States, Canada and Mexico, including our headquarters inDowners Grove, Illinois and our Company-owned drayage operations located throughout the United States. All of our office space is leased. Most office leaseshave initial terms of more than one year, and many include options to renew. While some of our leases expire in the near term, we do not believe that we willhave difficulty in renewing them or in finding alternative office space. We believe that our offices are adequate for the purposes for which they are currentlyused. Item 3.LEGAL PROCEEDINGSWe are a party to litigation incident to our business, including claims for personal injury and/or property damage, 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 insurancecarriers. 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 amaterially adverse effect on our financial position or results of operations. See Item 1 Business - Risk Management and Insurance. Item 4.[REMOVED AND RESERVED]Executive Officers of the RegistrantIn reliance on General Instruction G to Form 10-K, information on executive officers of the Registrant is included in this Part I. The table sets forthcertain information as of February 1, 2011 with respect to each person who is an executive officer of the Company. Name Age PositionDavid P. Yeager 57 Chairman of the Board of Directors and Chief Executive OfficerMark A. Yeager 46 Vice Chairman of the Board of Directors, President and Chief Operating OfficerChristopher R. Kravas 45 Chief Intermodal OfficerDonald G. Maltby 56 Chief Supply Chain OfficerDavid L. Marsh 43 Chief Marketing OfficerTerri A. Pizzuto 52 Executive Vice President, Chief Financial Officer and TreasurerJames B. Gaw 60 Executive Vice President-SalesDwight C. Nixon 48 Executive Vice President-Carrier ProcurementDennis R. Polsen 57 Executive Vice President-Information ServicesDavid C. Porter 47 Executive Vice President-Supply Chain SolutionsDavid C. Zeilstra 41 Vice President, Secretary and General CounselDavid P. Yeager has served as our Chairman of the Board since November 2008 and as Chief Executive Officer since March 1995. From March 1995through November 2008, Mr. Yeager served as Vice Chairman of the Board. From October 1985 through December 1991, Mr. Yeager was President of HubChicago. From 1983 to October 1985, he served as Vice President, Marketing of Hub Chicago. Mr. Yeager founded the St. Louis Hub in 1980 and served asits President from 1980 to 1983. Mr. Yeager founded the Pittsburgh Hub in 1975 and served as its President from 1975 to 1977. Mr. Yeager received aMasters in Business Administration degree from the University of Chicago in 1987 and a Bachelor of Arts degree from the University of Dayton in 1975.Mr. Yeager is the brother of Mark A. Yeager.Mark A. Yeager has served as Vice Chairman of the Board since November 2008. He became the President of the Company in January 2005 and hasbeen our Chief Operating Officer and a Director since May 2004. From July 1999 to December 2004, Mr. Yeager was President-Field Operations. FromNovember 1997 through June 1999, Mr. Yeager was Division President, Secretary and General Counsel. From March 1995 to November 1997, Mr. Yeagerwas Vice President, Secretary and General Counsel. From May 1992 to March 1995, Mr. Yeager served as our Vice President-Quality. Prior to joining us in1992, Mr. Yeager was an associate at the law firm of Grippo & Elden from January 1991 through May 1992 and an associate at the law firm of Sidley &Austin from May 1989 through January 1991. Mr. Yeager received a Juris Doctor degree from Georgetown University in 1989 and a Bachelor of Arts degreefrom Indiana University in 1986. Mr. Yeager is the brother of David P. Yeager. 8Table of ContentsChristopher R. Kravas has been our Chief Intermodal Officer since October 2007. Prior to this promotion, Mr. Kravas was Executive Vice President-Strategy and Yield Management from December 2003 through September 2007. From February 2002 through November 2003, Mr. Kravas served as Presidentof Hub Highway Services. From February 2001 through December 2001, Mr. Kravas was Vice President-Enron Freight Markets. Mr. Kravas joined Enronafter it acquired Webmodal, an intermodal business he founded. Mr. Kravas was Chief Executive Officer of Webmodal from July 1999 through February2001. From 1989 through June 1999 Mr. Kravas worked for the Burlington Northern Santa Fe Railway in various positions in the intermodal business unitand finance department. Mr. Kravas received a Bachelor of Arts degree in 1987 from Indiana University and a Masters in Business Administration in 1994from the University of Chicago.Donald G. Maltby was appointed Chief Supply Chain Officer of Hub Supply Chain Solutions as of January 2011. From February 2004 to December2010, Mr. Maltby served as Executive Vice President-Logistics Services. Mr. Maltby previously served as President of Hub Online, our e-commerce division,from February 2000 through January 2004. Mr. Maltby also served as President of Hub Cleveland from July 1990 through January 2000 and from April 2002to January 2004. Prior to joining Hub Group, Mr. Maltby served as President of Lyons Transportation, a wholly owned subsidiary of Sherwin WilliamsCompany, from 1988 to 1990. In his career at Sherwin Williams, which began in 1981 and continued until he joined us in 1990, Mr. Maltby held a varietyof management positions including Vice-President of Marketing and Sales for their Transportation Division. Mr. Maltby has been in the transportation andlogistics industry since 1976, holding various executive and management positions. Mr. Maltby received a Masters in Business Administration from BaldwinWallace College in 1982 and a Bachelor of Science degree from the State University of New York in 1976.David L. Marsh has been our Chief Marketing Officer since October 2007. Prior to this promotion, Mr. Marsh was Executive Vice President-Highwayfrom February 2004 through September 2007. Mr. Marsh previously served as President of Hub Ohio from January 2000 through January 2004. Mr. Marshjoined us in March 1991 and became General Manager with Hub Indianapolis in 1993, a position he held through December 1999. Prior to joining HubGroup, Mr. Marsh worked for Carolina Freight Corporation, a less than truckload carrier, starting in January 1990. Mr. Marsh received a Bachelor ofScience degree in Marketing and Physical Distribution from Indiana University-Indianapolis in December 1989. Mr. Marsh has been a member of theAmerican Society of Transportation and Logistics, the Indianapolis Traffic Club, the Council for Logistics Management and served as an advisor to theIndiana University-Indianapolis internship program for transportation and logistics. Mr. Marsh was honored as the Indiana Transportation Person of the Yearin 1999.Terri A. Pizzuto has been our Executive Vice President, Chief Financial Officer and Treasurer since March 2007. Prior to this promotion, Ms. Pizzutowas Vice President of Finance from July 2002 through February 2007. Prior to joining us, Ms. Pizzuto was a partner in the Assurance and Business AdvisoryGroup at Arthur Andersen LLP. Ms. Pizzuto worked for Arthur Andersen LLP for 22 years holding various positions and serving numerous transportationcompanies. Ms. Pizzuto received a Bachelor of Science in Accounting from the University of Illinois in 1981. Ms. Pizzuto is a CPA and a member of theAmerican Institute of Certified Public Accountants.James B. Gaw has been our Executive Vice President-Sales since February 2004. From December 1996 through January 2004, Mr. Gaw was Presidentof Hub North Central, located in Milwaukee. From 1990 through late 1996, he was Vice President and General Manager of Hub Chicago. Mr. Gaw joinedHub Chicago as Sales Manager in 1988. Mr. Gaw’s entire career has been spent in the transportation industry, including 13 years of progressive leadershippositions at Itofca, an intermodal marketing company, and Flex Trans. Mr. Gaw received a Bachelor of Science degree from Elmhurst College in 1973.Dwight C. Nixon was appointed our Executive Vice President-Carrier Procurement as of January 2011. From October 2007 to December 2010,Mr. Nixon served as our Executive Vice President-Highway. Mr. Nixon previously served as Regional Vice President of Highway’s Western Region from April2004 through September 2007. Prior to joining us, Mr. Nixon was a Senior Corporate Account Executive for Roadway Express, Inc. and spent 19 years invarious operational, sales and sales management positions. Mr. Nixon was also a California Gubernatorial appointee and member of the California WorkforceInvestment Board from November 2005 through December 2007. Mr. Nixon received a Bachelor of Science degree in Finance from the University of Arizonain 1984.Dennis R. Polsen has been our Executive Vice President-Information Services since February 2004. From September 2001 to January 2004, Mr. Polsenwas Vice President-Chief Information Officer and from March 2000 through August 2001, Mr. Polsen was our Vice-President of Application Development.Prior to joining us, Mr. Polsen was Director of Applications for Humana, Inc. from September 1997 through February 2000 and spent 14 years prior to thatdeveloping, implementing, and directing transportation logistics applications at Schneider National, Inc. Mr. Polsen received a Masters in BusinessAdministration in May of 1983 from the University of Wisconsin Graduate School of Business and a Bachelor of Business Administration in May of 1976from the University of Wisconsin-Milwaukee. Mr. Polsen is a past member of the American Trucking Association. 9Table of ContentsDavid C. Porter was appointed Executive Vice President-Supply Chain Solutions as of January of 2011. Mr. Porter initially joined Hub Group inFebruary of 1988 and has served in numerous leadership roles including President of Hub Group Los Angeles and President of Hub Group Golden Gate. WithHub Group’s corporate restructuring in February 2004, Mr. Porter was appointed as Vice President-Sales, Western Region. Mr. Porter briefly left Hub Groupbeginning in March 2007, acting as a Registered Investment Advisor with Index Funds Advisors. In December 2008, Mr. Porter returned to Hub Group,serving as Hub Group’s Vice President-Acquisitions until August 2009 when he established and led a part of the Hub Highway division directed at increasingtransactional business with smaller customers. Mr. Porter received a Masters in Business Administration from University of Redlands in 1997 and aBachelor of Business Administration from Western Michigan University in 1985.David C. Zeilstra has been our Vice President, Secretary and General Counsel since July 1999. From December 1996 through June 1999, Mr. Zeilstrawas our Assistant General Counsel. Prior to joining us, Mr. Zeilstra was an associate with the law firm of Mayer, Brown & Platt from September 1994through November 1996. Mr. Zeilstra received a Juris Doctor degree from Duke University in 1994 and a Bachelor of Arts degree from Wheaton College in1990.Directors of the RegistrantIn addition to David P. Yeager and Mark A. Yeager, the following three individuals are also on our Board of Directors: Gary D. Eppen – currently retiredand formerly the Ralph and Dorothy Keller Distinguished Service Professor of Operations Management and Deputy Dean for part-time Masters in BusinessAdministration Programs at the Graduate School of Business at the University of Chicago; Charles R. Reaves – Chief Executive Officer of ReavesEnterprises, Inc., a real estate development company, and Martin P. Slark – Vice Chairman and Chief Executive Officer of Molex Incorporated, amanufacturer of electronic, electrical and fiber optic interconnection products and systems.PART II Item 5.MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED SHAREHOLDER MATTERS AND ISSUERPURCHASES OF EQUITY SECURITIESOur Class A Common Stock (“Class A Common Stock”) trades on the NASDAQ Global Select Market tier of the NASDAQ Stock Market under thesymbol “HUBG.” There is no established trading market for shares of our Class B Common Stock (the “Class B Common Stock” together with the Class ACommon Stock, the “Common Stock”). Set forth below are the high and low closing prices for shares of the Class A Common Stock for each full quarterlyperiod in 2010 and 2009. 2010 2009 High Low High Low First Quarter $30.13 $21.53 $28.27 $15.83 Second Quarter $33.88 $28.06 $25.52 $17.42 Third Quarter $33.19 $25.47 $24.76 $18.34 Fourth Quarter $37.13 $27.91 $27.82 $22.48 On February 18, 2011, there were approximately 318 stockholders of record of the Class A Common Stock and, in addition, there were an estimated6,662 beneficial owners of the Class A Common Stock whose shares were held by brokers and other fiduciary institutions. On February 18, 2011, therewere 13 holders of record of our Class B Common StockWe were incorporated in 1995 and have never paid cash dividends on either the Class A Common Stock or the Class B Common Stock. Thedeclaration and payment of dividends are subject to the discretion of the Board of Directors. Any determination as to the payment of dividends will dependupon our results of operations, capital requirements and financial condition of the Company, and such other factors as the Board of Directors may deemrelevant. Accordingly, there can be no assurance that the Board of Directors will declare or pay cash dividends on the shares of Common Stock in the future.Our certificate of incorporation requires that any cash dividends must be paid equally on each outstanding share of Class A Common Stock and Class BCommon Stock. Our credit facility prohibits us from paying dividends on the Common Stock if there has been, or immediately following the payment of adividend there would be, a default or an event of default under the credit facility. We are currently in compliance with the covenants contained in the creditfacility.On February 24, 2010, our Board of Directors authorized the purchase of up to $30.0 million of our Class A Common Stock. This authorization expiresMarch 31, 2011. We purchased 784,197 shares under this authorization during the year ended December 31, 2010. We may make purchases from time totime as market conditions warrant, and any repurchased shares are expected to be held in treasury for future use. See Footnote 13 for more information onshare repurchases. 10Table of ContentsPerformance GraphThe following line graph compares the Company’s cumulative total stockholder return on its Class A Common Stock since December 31, 2005 with thecumulative total return of the Nasdaq Stock Market Index and the Nasdaq Trucking and Transportation Index. These comparisons assume the investment of$100 on December 31, 2005 in each index and in the Company’s Class A Common Stock and the reinvestment of dividends. 11Table of ContentsItem 6.SELECTED FINANCIAL DATASelected Financial Data(in thousands except per share data) Years Ended December 31, 2010 2009 2008 2007 2006 (2) Statement of Income Data: Revenue $1,833,737 $1,510,970 $1,860,608 $1,658,168 $1,609,529 Gross margin 213,433 185,690 234,311 232,324 218,418 Operating income 69,882 55,531 95,462 90,740 77,236 Income from continuing operations before taxes 70,093 55,885 96,326 93,228 79,508 Income from continuing operations after taxes 43,458 34,265 59,245 59,799 47,705 Income from discontinued operations, net of tax (1) — — — — 981 Net income $43,458 $34,265 $59,245 $59,799 $48,686 Basic earnings per common share Income from continuing operations $1.17 $0.92 $1.59 $1.55 $1.19 Income from discontinued operations $— $— $— $— $0.03 Diluted earnings per common share Income from continuing operations $1.16 $0.91 $1.58 $1.53 $1.17 Income from discontinued operations $— $— $— $— $0.02 As of December 31, 2010 2009 2008 2007 2006 Balance Sheet Data: Total assets $629,407 $573,348 $528,231 $491,967 $484,548 Long-term debt, excluding current portion — — — — — Stockholders’ equity 376,300 353,841 315,184 250,899 258,844 (1)HGDS disposed of May 1, 2006(2)Comtrak was acquired February 28, 2006 12Table of ContentsItem 7.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSFORWARD LOOKING STATEMENTSThe information contained in this annual report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Actof 1995. Words such as “expects,” “hopes,” “believes,” “intends,” “estimates,” “anticipates,” and variations of these words and similar expressions areintended to identify these forward-looking statements. Forward-looking statements are inherently uncertain and subject to risks. Such statements should beviewed with caution. Actual results or experience could differ materially from the forward-looking statements as a result of many factors. We assume noliability to update any such forward-looking statements contained in this annual report. Factors that could cause our actual results to differ materially, inaddition to those set forth under Items 1A “Risk Factors,” include: • the degree and rate of market growth in the domestic intermodal, truck brokerage and logistics markets served by us; • deterioration in our relationships with existing railroads or adverse changes to the railroads’ operating rules; • changes in rail service conditions or adverse weather conditions; • further consolidation of railroads; • the impact of competitive pressures in the marketplace, including entry of new competitors, direct marketing efforts by the railroads or marketingefforts of asset-based carriers; • changes in rail, drayage and trucking company capacity; • railroads moving away from ownership of intermodal assets; • equipment shortages or equipment surplus; • changes in the cost of services from rail, drayage, truck or other vendors; • increases in costs for independent contractors due to regulatory, judicial and legal changes; • labor unrest in the rail, drayage or trucking company communities; • general economic and business conditions; • significant deterioration in our customers’ financial condition, particularly in the retail and durable goods sectors; • fuel shortages or fluctuations in fuel prices; • increases in interest rates; • changes in homeland security or terrorist activity; • difficulties in maintaining or enhancing our information technology systems; • changes to or new governmental regulation including CSA 2010 and hours of service; • significant increases to health insurance costs due to the Health Care and Education Reconciliation Act of 2010; • loss of several of our largest customers; • inability to recruit and retain key personnel; • inability to recruit and maintain drivers and owner operators; • changes in insurance costs and claims expense; • changes to current laws which will aid union organizing efforts; and • inability to close and successfully integrate any future business combinations.CAPITAL STRUCTUREWe have authorized common stock comprised of Class A Common Stock and Class B Common Stock. The rights of holders of Class A CommonStock and Class B Common Stock are identical, except each share of Class B Common Stock entitles its holder to approximately 80 votes, while each shareof Class A Common Stock entitles its holder to one vote. We have authorized 2,000,000 shares of preferred stock.EXECUTIVE SUMMARYHub Group, Inc. (“we”, “us” or “our”) is the largest intermodal marketing company (“IMC”) in the United States and a full service transportationprovider offering intermodal, truck brokerage and logistics services. We operate through a nationwide network of operating centers.As an IMC, we arrange for the movement of our customers’ freight in containers and trailers, typically over long distances of 750 miles or more. Wecontract 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 billingand handle claims for freight loss or damage on behalf of our customers. 13Table of ContentsApproximately half of our drayage services are provided by our subsidiary, Comtrak Logistics, Inc. (“Comtrak”), which assists us in providingreliable, cost effective intermodal services to our customers. Comtrak has terminals in Atlanta, Birmingham, Charleston, Charlotte, Chattanooga, Chicago,Cleveland, Columbus (OH), Dallas, Harrisburg, Huntsville, Indianapolis, Jacksonville, Kansas City, Milwaukee, Memphis, Nashville, Los Angeles, Perry(FL), Philadelphia, Savannah, St. Louis, Stockton, and Titusville (FL). As of February 1, 2011, Comtrak owned 283 tractors, leased or owned 502 trailers,employed 267 drivers and contracted with 1,414 owner-operators.We also arrange for the transportation of freight by truck, providing customers with another option for their transportation needs. We match thecustomers’ needs with carriers’ capacity to provide the most effective service and price combinations. As part of our truck brokerage services, we negotiaterates, track shipments in transit and handle claims for freight loss or damage on behalf of our customers.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.We have 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 transportationservices to them.Our yield management group works with pricing and operations to enhance customer margins. We are working on margin enhancement projectsincluding matching up inbound and outbound loads, reducing empty miles, improving our recovery of accessorial costs and reviewing and improving lowmargin loads bi-weekly. Our top 50 customers’ revenue represents approximately 61% of our revenue.We use various performance indicators to manage our business. We closely monitor margin and gains and losses for our top 50 customers and loadsthat are not beneficial to our network. We also evaluate on-time performance, cost per load and daily sales outstanding by customer account. Vendor costchanges and vendor service issues are also monitored closely. 14Table of ContentsRESULTS OF OPERATIONSYear Ended December 31, 2010 Compared to Year Ended December 31, 2009The following table summarizes our revenue by service line (in thousands): Twelve Months EndedDecember 31, 2010 2009 %Change Revenue Intermodal $1,285,163 $1,054,862 21.8% Brokerage 335,000 292,639 14.5% Logistics 213,574 163,469 30.7% Total revenue $1,833,737 $1,510,970 21.4% The following table includes certain items in the consolidated statements of income as a percentage of revenue: Twelve Months EndedDecember 31, 2010 2009 Revenue 100.0% 100.0% Transportation costs 88.4 87.7 Gross margin 11.6 12.3 Costs and expenses: Salaries and benefits 5.4 5.9 General and administration 2.2 2.4 Depreciation and amortization 0.2 0.3 Total costs and expenses 7.8 8.6 Operating income 3.8 3.7 Other income (expense): Interest and dividend income 0.0 0.0 Total other income 0.0 0.0 Income before provision for income taxes 3.8 3.7 Provision for income taxes 1.5 1.4 Net income 2.3% 2.3% 15Table of ContentsRevenueRevenue increased 21.4% to $1,833.7 million in 2010 from $1,511.0 million in 2009. Intermodal revenue increased 21.8% to $1,285.2 million from$1,054.9 million due to a 19% increase in volume and a 5% increase for fuel partially offset by a 2% decrease for mix. Pricing was flat year-over-year. Truckbrokerage revenue increased 14.5% to $335.0 million from $292.6 million due to a 10% increase in volume and a 4% increase for fuel. Price and mix were flatyear-over-year. Logistics revenue increased 30.7% to $213.6 million from $163.5 million due to increases in business from both new and existing customersin 2010.Gross MarginGross margin increased 14.9% to $213.4 million in 2010 from $185.7 million in 2009. This $27.7 million margin increase came from our intermodal,truck brokerage and logistics businesses. Gross margin as a percentage of revenue decreased to 11.6% in 2010 from 12.3% in 2009. The decrease in grossmargin as a percentage of revenue was driven primarily by an increase in truck brokerage costs resulting from tighter capacity as well as logistics’ growthcoming mostly from transactional business as opposed to higher margin management fee business.Salaries and BenefitsSalaries and benefits increased to $99.1 million in 2010 from $88.5 million in 2009 partially due to an increase in bonus expense of $7.9 million,salaries of $1.9 million and commissions of $0.8 million. Bonuses were higher than last year due primarily to the EPS based portion of the bonus beingaccrued in 2010 while no EPS bonus was accrued in 2009. As a percentage of revenue, salaries and benefits decreased to 5.4% in 2010 from 5.9% in 2009.Headcount as of December 31, 2010 and 2009 was 1,123 and 1,028, respectively, which excludes drivers, as driver costs are included in transportationcosts.General and AdministrativeGeneral and administrative expenses increased to $40.6 million in 2010 from $37.5 million in 2009. As a percentage of revenue, general andadministrative expenses decreased to 2.2% in 2010 from 2.4% in 2009. Total expenses increased primarily due to an increase in independent contractorcommission expenses of $1.7 million, recruiting costs associated with owner operators of $1.0 million, office expense of $0.9 million related primarily to thereplacement of personal computers and professional services of $0.3 million. These increases were partially offset by a $1.3 million decrease in bad debts dueto bankruptcies of certain customers in 2009 and bankruptcy recoveries in 2010.Depreciation and AmortizationDepreciation and amortization decreased 9.2% to $3.8 million in 2010 from $4.2 million in 2009. This expense as a percentage of revenue decreased to0.2% in 2010 from 0.3% in 2009. The decrease in depreciation and amortization was due primarily to the disposal of certain assets in 2010.Other Income (Expense)Interest expense remained consistent at $0.1 million in 2010 and 2009. Interest and dividend income remained consistent at $0.1 million in 2010 and2009. Other income and expense decreased to $0.1 million in 2010 from $0.3 in 2009. This decrease was primarily due to less favorable effects of currencytranslation for the year ended December 31, 2010.Provision for Income TaxesThe provision for income taxes increased to $26.6 million in 2010 from $21.6 million in 2009. Although our effective tax rate decreased to 38.0% in2010 from 38.7% in 2009, the additional 2010 pretax income of $14.2 million more than offset the rate decrease. The 2010 effective tax rate decrease was dueprimarily to the impact from tax law changes enacted in February 2009 by Wisconsin and California which increased our effective tax rate in 2009 comparedto tax law changes enacted by California in October 2010 which decreased our rate.Net IncomeNet income increased to $43.5 million in 2010 from $34.3 million in 2009 due primarily to higher gross margin.Earnings Per Common ShareBasic earnings per share was $1.17 in 2010 and $0.92 in 2009. Basic earnings per share increased due to the increase in net income and fewer basicweighted average shares due to treasury stock purchases.Diluted earnings per share increased to $1.16 in 2010 from $0.91 in 2009. Diluted earnings per share increased due to the increase in net income. 16Table of ContentsRESULTS OF OPERATIONSYear Ended December 31, 2009 Compared to Year Ended December 31, 2008The following table summarizes our revenue by service line (in thousands): Twelve Months EndedDecember 31, 2009 2008 %Change Revenue Intermodal $1,054,862 $1,329,382 (20.7%) Brokerage 292,639 372,051 (21.3%) Logistics 163,469 159,175 2.7% Total revenue $1,510,970 $1,860,608 (18.8%) The following table includes certain items in the consolidated statements of income as a percentage of revenue: Twelve Months EndedDecember 31, 2009 2008 Revenue 100.0% 100.0% Transportation costs 87.7 87.4 Gross margin 12.3 12.6 Costs and expenses: Salaries and benefits 5.9 5.0 General and administration 2.4 2.3 Depreciation and amortization 0.3 0.2 Total costs and expenses 8.6 7.5 Operating income 3.7 5.1 Other income (expense): Interest and dividend income 0.0 0.1 Total other income 0.0 0.1 Income before provision for income taxes 3.7 5.2 Provision for income taxes 1.4 2.0 Net income 2.3% 3.2% 17Table of ContentsRevenueRevenue decreased 18.8% to $1,511.0 million in 2009 from $1,860.6 million in 2008. Intermodal revenue decreased 20.7% to $1,054.9 million from$1,329.4 million due to an 11% decline for fuel, a 5% decrease in volume, a 3% price decrease and a 2% decrease for mix. Truck brokerage revenue decreased21.3% to $292.6 million from $372.1 million due to a 2% decrease in volume, an 11% decline for fuel and an 8% decline due to price and mix. Logisticsrevenue increased 2.7% to $163.5 million from $159.2 million due to increases in business from both new and existing customers in 2009.Gross MarginGross margin decreased 20.8% to $185.7 million in 2009 from $234.3 million in 2008. Gross margin as a percentage of revenue decreased to 12.3% in2009 from 12.6% in 2008. This decline was primarily due to decreases in intermodal gross margin, related to lower price and mix. These decreases werepartially offset by cost reductions from better management of our drayage operations and other margin initiatives.Salaries and BenefitsSalaries and benefits decreased to $88.5 million in 2009 from $93.7 million in 2008 partially due to a decrease in bonus expense of $2.2 million,salaries and benefits of $2.1 million and commissions of $0.8 million. The decrease in bonus expense was the result of not earning any EPS based bonus in2009. As a percentage of revenue, salaries and benefits increased to 5.9% in 2009 from 5.0% in 2008. Headcount as of December 31, 2009 and 2008 was1,028 and 1,099, respectively, which excludes drivers, as driver costs are included in transportation costs.General and AdministrativeGeneral and administrative expenses decreased to $37.5 million from $41.2 million in 2008. Total expenses decreased due to reductions in outsideservices of $1.4 million, travel and entertainment expenses of $1.2 million, office expense of $0.6 million and outside sales commissions of $0.4 million.These reductions were partially offset by a $0.7 million increase in bad debts due to bankruptcies of certain customers. The reduction in travel andentertainment expenses resulted primarily from an increased focus on controlling costs. As a percentage of revenue, general and administrative expensesincreased to 2.4% in 2009 from 2.3% in 2008.Depreciation and AmortizationDepreciation and amortization increased 5.5% to $4.2 million in 2009 from $4.0 million in 2008. This expense as a percentage of revenue increased to0.3% in 2009 from 0.2% in 2008. The increase in depreciation and amortization was due primarily to a decrease in the salvage value of certain assets whichoccurred in 2009.Other Income (Expense)Interest expense remained consistent at $0.1 million in 2009 and 2008. Interest and dividend income decreased to $0.1 million in 2009 from $1.2 millionin 2008. The decrease in interest and dividend income was the result of lower interest rates in 2009 primarily due to investing our cash in money market fundscomprised of U.S. Treasury Securities and repurchase agreements for these securities rather than commercial paper.Provision for Income TaxesThe provision for income taxes decreased to $21.6 million in 2009 from $37.1 million in 2008. We provided for income taxes using an effective rate of38.7% in 2009 compared to 38.5% in 2008. The 2009 effective rate was higher due to income tax law changes enacted in February, 2009 by Wisconsin andCalifornia, which resulted in an increase of income tax expense of approximately $0.4 million.Net IncomeNet income decreased to $34.3 million in 2009 from $59.2 million in 2008 due primarily to lower gross margin.Earnings Per Common ShareBasic earnings per share was $0.92 in 2009 and $1.59 in 2008. Basic earnings per share decreased due to the decrease in net income. 18Table of ContentsDiluted earnings per share decreased to $0.91 in 2009 from $1.58 in 2008. Diluted earnings per share decreased due to the decrease in net income.LIQUIDITY AND CAPITAL RESOURCESDuring 2010, we funded operations, capital expenditures and stock buy backs through cash flows from operations and cash on hand. We believe thatour cash, cash flow from operations and borrowings available under our Credit Agreement will be sufficient to meet our cash needs for at least the next twelvemonths.Cash provided by operating activities for the year ended December 31, 2010 was approximately $37.7 million, which resulted primarily from income of$43.5 million adjusted for non-cash charges of $21.8 million offset by the change in operating assets and liabilities of $27.6 million.Net cash used in investing activities was $24.8 million for the year ended December 31, 2010, which related to capital expenditures of $25.6 million,partially offset by proceeds from the sale of equipment of $1.0 million. We expect capital expenditures to be between $23.0 million and $25.0 million in 2011.We have agreed to acquire an additional 3,000 containers for approximately $33.0 million in 2011. We have not yet decided if we will lease or buy thecontainers. If the containers are purchased this would increase our capital expenditures. We are also exploring the purchase of an operating center which couldincrease our capital expenditures by an additional $15.0 million to $20.0 million.The net cash used in financing activities for the year ended December 31, 2010 was $24.6 million. We used $25.1 million of cash to purchase treasurystock and reported $0.4 million of excess tax benefits from share-based compensation as a financing cash in-flow.On March 3, 2010, we entered into an amendment to our Credit Agreement which reduced our maximum unsecured borrowing capacity under the CreditAgreement from $50.0 million to $10.0 million and extended the term of the Credit Agreement until March 2013. The interest rate of the Credit Agreement isequal to LIBOR plus 1.75%. The financial covenants require a minimum net worth of $275.0 million and a cash flow leverage ratio of not more than 2.0 to1.0. The commitment fee charged on the unused line of credit is 0.375%. The revolving line of credit expires on March 3, 2013. We believe that the $10.0million in unsecured borrowing capacity more accurately reflects our borrowing needs in the coming years in light of our historical lack of borrowings againstthe line of credit, significant cash balance and ability to generate cash.Our unused and available borrowings under our bank revolving line of credit were $7.4 million as of December 31, 2010 and $47.1 million as ofDecember 31, 2009. We were in compliance with our debt covenants as of December 31, 2010.We have standby letters of credit that expire from 2011 to 2012. As of December 31, 2010, our letters of credit were $2.6 million.We have authorization to spend up to $30.0 million to purchase common stock through March 2011. We purchased 784,197 shares under thisauthorization during the year ended December 31, 2010 and have $6.4 million remaining under this authorization. We may make additional purchasesthrough March 2011 as market conditions warrant.CONTRACTUAL OBLIGATIONSOur contractual cash obligations as of December 31, 2010 were minimum rental commitments. Minimum annual rental commitments, as ofDecember 31, 2010, under non-cancelable operating leases, principally for containers and equipment and real estate are payable as follows (in thousands): 2011 $16,276 2012 12,469 2013 5,127 2014 1,479 2015 850 2016 and thereafter 120 $36,321 On October 11, 2010, we entered into an Equipment Purchase Contract with Singamas Management Services, Ltd. for the acquisition of 3,000 53’containers. We have not yet decided if we will lease or buy the containers. In the event we purchase the containers, we expect the costs to be approximately$33.0 million. We expect to take delivery of the equipment between May and September 2011. 19Table of ContentsDeferred CompensationUnder our Nonqualified Deferred Compensation Plan (the “Plan”), participants can elect to defer certain compensation. Payments under the Plan are dueas follows (in thousands): 2011 $804 2012 1,112 2013 973 2014 990 2015 985 2016 and thereafter 7,662 $12,526 CRITICAL ACCOUNTING POLICIESThe preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates andassumptions. In certain circumstances, those estimates and assumptions can affect amounts reported in the accompanying consolidated financial statements.We have made our best estimates and judgments of certain amounts included in the financial statements, giving due consideration to materiality. We do notbelieve there is a great likelihood that materially different amounts would be reported related to the accounting policies described below. However, application ofthese accounting policies involves the exercise of judgment and use of assumptions as to future uncertainties and, as a result, actual results could differ fromthese estimates. The following is a brief discussion of the more significant accounting policies and estimates.Allowance for Uncollectible Trade Accounts ReceivableIn the normal course of business, we extend credit to customers after a review of each customer’s credit history. An allowance for uncollectible tradeaccounts has been established through an analysis of the accounts receivable aging, an assessment of collectibility based on historical trends and an evaluationbased on current economic conditions. To be more specific, we reserve a portion of every account balance that has aged over one year, a portion of receivablesfor customers in bankruptcy and certain account balances specifically identified as uncollectible. On an annual basis, we perform a hindsight analysis todetermine our experience in collecting account balances over one year old and account balances in bankruptcy. We then use this hindsight analysis to establishour reserves for receivables over one year and in bankruptcy. In establishing a reserve for certain account balances specifically identified as uncollectible, weconsider the aging of the customer receivables, the customer’s current and projected financial results, the customer’s ability to meet and sustain their financialcommitments, the positive or negative effects of the current and projected industry outlook and the general economic conditions. The Company’s level ofreserves for its customer accounts receivable fluctuate depending upon all the factors mentioned above. However, we do not expect the reserve for uncollectibleaccounts to change significantly relative to our accounts receivable balance. Historically, our reserve for uncollectible accounts has approximated actualaccounts written off. The allowance for uncollectible accounts is reported on the balance sheet in net accounts receivable. Recoveries of receivables previouslycharged off are recorded when received.Revenue RecognitionRevenue is recognized at the time 1) persuasive evidence of an arrangement exists, 2) services have been rendered, 3) the sales price is fixed anddeterminable and 4) collectibility is reasonably assured. Revenue and related transportation costs are recognized based on relative transit time. Further, wereport revenue on a gross basis because we are the primary obligor and are responsible for providing the service desired by the customer. The customer viewsus as responsible for fulfillment including the acceptability of the service. Service requirements may include, for example, on-time delivery, handling freightloss 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 aresult, our earnings vary. In addition, we have the discretion to select our vendors from multiple suppliers for the services ordered by our customers. Finally,we have credit risk for our receivables. These three factors, discretion in setting prices, discretion in selecting vendors and credit risk, further supportreporting revenue on the gross basis.Provision for Income TaxesDeferred income taxes are recognized for the future tax effects of temporary differences between financial and income tax reporting using tax rates in effectfor the years in which the differences are expected to reverse. We believe that it is more likely than not that our deferred tax assets will be realized based onfuture taxable income projections with the exception of $0.4 million related to state tax net operating losses for which a valuation allowance has beenestablished. In the event the probability of realizing the remaining deferred tax assets do not meet the more likely than not threshold in the future, a valuationallowance would be established for the deferred tax assets deemed unrecoverable. 20Table of ContentsTax liabilities are recorded when, in management’s judgment, a tax position does not meet the more likely than not threshold for recognition as prescribedby the guidance. For tax positions that meet the more likely than not threshold, a tax liability may be recorded depending on management’s assessment of howthe tax position will ultimately be settled.Valuation of Goodwill and Other Indefinite-Lived IntangiblesWe review goodwill and other indefinite-lived intangibles for impairment on an annual basis or whenever events or changes in circumstances indicate thecarrying amount of goodwill or other indefinite-lived intangibles may not be recoverable. An indefinite lived intangible asset is impaired if its fair value is lessthan its carrying value. Goodwill impairment is indicated if the fair value of the reporting unit is less than its carrying value. An impairment loss is measuredas the difference between the implied fair value of the reporting unit’s goodwill and the carrying amount of goodwill. We utilize a third party independentvaluation firm to assist in performing the necessary valuations to be used in the impairment testing. These valuations are based on a market comparableapproach, a discounted cash flow approach or a combination of both approaches. The fair value measurement is determined based on assumptions that amarket participant would use including expectations regarding future operating performance (which are consistent with our internal projections and operatingplans), discount rates, control premiums and other factors which are subjective in nature. As of December 31, 2010, reasonable variations in theseassumptions do not have a significant impact on the results of the goodwill impairment test. Actual cash flows from operations could differ frommanagement’s estimates due to changes in business conditions, operating performance and economic conditions.Valuation of Finite-Lived Intangibles and Fixed AssetsWe evaluate the potential impairment of finite-lived intangible assets and fixed assets when impairment indicators exist. If the carrying value is no longerrecoverable based upon the undiscounted future cash flows of the asset, the amount of the impairment is the difference between the carrying amount and thefair value of the asset.EquipmentWe operate tractors and utilize containers in connection with our business. This equipment may be purchased or leased. In addition, we rent equipmentfrom third parties and various railroads under short term rental arrangements. Equipment which is purchased is depreciated on the straight line method overthe estimated useful life. Our equipment leases have five to seven year terms and in some cases contain renewal options.Stock Based CompensationShare-based compensation includes the restricted stock awards expected to vest based on the grant date fair value. Compensation expense is amortizedstraight-line over the vesting period and is included in salaries and benefits.New PronouncementsIn June 2009, the FASB issued amendments to the guidance on variable interest entities and consolidation, codified primarily in the Consolidation Topicof the FASB ASC. This guidance modifies the method for determining whether an entity is a variable interest entity as well as the methods permitted fordetermining the primary beneficiary of a variable interest entity. In addition, this guidance requires ongoing reassessments of whether a company is theprimary beneficiary of a variable interest entity and enhanced disclosures related to a company’s involvement with a variable interest entity. The Companyadopted this guidance effective January 1, 2010, as required. The adoption of this standard did not impact our financial statements.In December 2010, the FASB issued guidance in the business combinations topic of codification. This guidance amends certain existing and addsadditional pro forma disclosure requirements for public enterprises. This guidance is effective for business combinations for which the acquisition date is onor after the beginning of the first annual reporting beginning on or after December 15, 2010. Any impact would be on future acquisitions. 21Table of ContentsOUTLOOK, RISKS AND UNCERTAINTIESBusiness Combinations/DivestituresWe believe that any future acquisitions that we may make could significantly impact financial results. Financial results most likely to be impactedinclude, but are not limited to, revenue, gross margin, salaries and benefits, selling general and administrative expenses, depreciation and amortization,interest expense, net income and our debt level.RevenueWe believe that the performance of the railroads and a severe or prolonged slow-down of the economy are the most significant factors that couldnegatively influence our revenue growth rate. Should there be further consolidation in the rail industry causing a service disruption, we believe our intermodalbusiness would likely be negatively impacted. Should there be a significant service disruption, we expect that there may be some customers who would switchfrom using our intermodal service to other transportation services. We expect that these customers may choose to continue to utilize other services even whenintermodal service levels are restored. Other factors that could negatively influence our growth rate include, but are not limited to, the elimination of fuelsurcharges, the entry of new competitors, customer retention, inadequate drayage service and inadequate equipment supply.Gross MarginWe expect fluctuations in gross margin as a percentage of revenue from quarter-to-quarter caused by various factors including, but not limited to,changes in the transportation business mix, changes in logistics services between transactional business and management fee business, insurance costs, trailerand container capacity, vendor pricing, fuel costs, intermodal industry growth, intermodal industry service levels, accessorials, competitive pricing andaccounting estimates.Salaries and BenefitsWe estimate that salaries and benefits as a percentage of revenue could fluctuate from quarter-to-quarter as there are timing differences between volumeincreases and changes in levels of staffing. Factors that could affect the percentage from staying in the recent historical range include, but are not limited to,revenue growth rates significantly higher or lower than forecasted, a management decision to invest in additional personnel to stimulate new or existingbusinesses, changes in customer requirements, changes in our operating structure, how well we perform against our EPS goals, and changes in railroadintermodal service levels which could result in a lower or higher cost of labor per move.General and AdministrativeWe believe there are several factors that could cause general and administrative expenses to fluctuate as a percentage of revenue. As customer expectationsand the competitive environment require the development of web-based business interfaces and the restructuring of our information systems and relatedplatforms, we believe there could be significant expenses incurred, some of which would not be capitalized. Other factors that could cause selling, general andadministrative expense to fluctuate include, but are not limited to, changes in insurance premiums, bad debt expenses and professional services expense.Depreciation and AmortizationWe estimate that depreciation and amortization of property and equipment in 2011 will approximate 2010 unless we purchase an operating center.Impairment of Property and Equipment, Goodwill and Indefinite-Lived IntangiblesOn an ongoing basis, we assess the realizability of our assets. If, at any point during the year, management determines that an impairment exists, thecarrying amount of the asset is reduced by the estimated impairment with a corresponding charge to earnings which management estimates could have amaterial adverse impact on earnings.Other Income (Expense)Factors that could cause a change in interest income include, but are not limited to, change in interest rates, change in investments, funding workingcapital needs, funding capital expenditures, funding an acquisition and buying back stock. 22Table of ContentsProvision for Income TaxesWe estimate that our effective tax rate will be 38.5% in 2011. Item 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKWe 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 andfinancial condition. We have no significant exposure to foreign currency exchange rate changes. No derivative financial instruments were outstanding as ofDecember 31, 2010 and 2009. We do not use financial instruments for trading purposes.As of December 31, 2010 and 2009, the Company had no outstanding obligations under its bank line of credit arrangement. Item 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATAINDEX TO FINANCIAL STATEMENTSAND FINANCIAL STATEMENT SCHEDULE Report of Independent Registered Public Accounting Firm 24 Consolidated Balance Sheets – December 31, 2010 and December 31, 2009 25 Consolidated Statements of Income – Years ended December 31, 2010, December 31, 2009 and December 31, 2008 26 Consolidated Statements of Stockholders’ Equity – Years ended December 31, 2010, December 31, 2009 and December 31, 2008 27 Consolidated Statements of Cash Flows – Years ended December 31, 2010, December 31, 2009 and December 31, 2008 28 Notes to Consolidated Financial Statements 29 Schedule II – Valuation and Qualifying Accounts S-1 23Table of ContentsREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMThe Board of Directors and Stockholders of Hub Group, Inc.:We have audited the accompanying consolidated balance sheets of Hub Group, Inc. as of December 31, 2010 and 2009 and the relatedconsolidated statements of income, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2010. Our audits alsoincluded the financial statement schedule listed in the index at Item 15(b). These financial statements and schedule are the responsibility of the Company’smanagement. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standardsrequire that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An auditincludes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing theaccounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. Webelieve that our audits provide a reasonable basis for our opinion.In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Hub Group,Inc. at December 31, 2010 and 2009, and the consolidated results of its operations and its cash flows for each of the three years in the period endedDecember 31, 2010 in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule whenconsidered in relation to the basic consolidated financial statements taken as a whole, presents fairly in all material respects the information set forth therein.We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Hub Group, Inc.’sinternal control over financial reporting as of December 31, 2010, based on criteria established in Internal Control – Integrated Framework issued by theCommittee of Sponsoring Organizations of the Treadway Commission and our report dated February 24, 2011 expressed an unqualified opinion thereon.ERNST & YOUNG LLPChicago, IllinoisFebruary 24, 2011 24Table of ContentsHUB GROUP, INC.CONSOLIDATED BALANCE SHEETS(in thousands, except share amounts) December 31, 2010 2009 ASSETS CURRENT ASSETS: Cash and cash equivalents $115,144 $126,863 Accounts receivable trade, net 185,879 145,317 Accounts receivable other 17,958 11,932 Prepaid taxes 296 593 Deferred taxes 3,314 2,874 Prepaid expenses and other current assets 6,569 6,801 TOTAL CURRENT ASSETS 329,160 294,380 Restricted investments 11,421 9,583 Property and equipment, net 47,806 28,510 Other intangibles, net 5,856 6,164 Goodwill, net 233,029 232,892 Other assets 2,135 1,819 TOTAL ASSETS $629,407 $573,348 LIABILITIES AND STOCKHOLDERS’ EQUITY CURRENT LIABILITIES: Accounts payable trade $121,078 $110,626 Accounts payable other 10,064 7,695 Accrued payroll 14,378 8,253 Accrued other 21,898 18,958 TOTAL CURRENT LIABILITIES 167,418 145,532 Non-current liabilities 13,950 12,002 Deferred taxes 71,739 61,973 STOCKHOLDERS’ EQUITY: Preferred stock, $.01 par value; 2,000,000 shares authorized; no shares issued or outstanding in 2010 and 2009 — — Common stock Class A: $.01 par value; 97,337,700 shares authorized and 41,224,792 shares issued in 2010 and 2009;36,638,359 outstanding in 2010 and 37,253,330 shares outstanding in 2009 412 412 Class B: $.01 par value; 662,300 shares authorized; 662,296 shares issued and outstanding in 2010 and 2009 7 7 Additional paid-in capital 169,722 171,470 Purchase price in excess of predecessor basis, net of tax benefit of $10,306 (15,458) (15,458) Retained earnings 343,010 299,552 Accumulated other comprehensive income (loss) 6 (9) Treasury stock; at cost, 4,586,433 shares in 2010 and 3,971,462 shares in 2009 (121,399) (102,133) TOTAL STOCKHOLDERS’ EQUITY 376,300 353,841 TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $629,407 $573,348 The accompanying notes to consolidated financial statements are an integral part of these statements. 25Table of ContentsHUB GROUP, INC.CONSOLIDATED STATEMENTS OF INCOME(in thousands, except per share amounts) Years Ended 2010 2009 2008 Revenue $1,833,737 $1,510,970 $1,860,608 Transportation costs 1,620,304 1,325,280 1,626,297 Gross margin 213,433 185,690 234,311 Costs and expenses: Salaries and benefits 99,138 88,518 93,658 General and administrative 40,621 37,467 41,234 Depreciation and amortization 3,792 4,174 3,957 Total costs and expenses 143,551 130,159 138,849 Operating income 69,882 55,531 95,462 Other income (expense): Interest expense (54) (91) (102) Interest and dividend income 119 146 1,153 Other, net 146 299 (187) Total other income 211 354 864 Income before provision for income taxes 70,093 55,885 96,326 Provision for income taxes 26,635 21,620 37,081 Net income $43,458 $34,265 $59,245 Basic earnings per common share $1.17 $0.92 $1.59 Diluted earnings per common share $1.16 $0.91 $1.58 Basic weighted average number of shares outstanding 37,223 37,367 37,174 Diluted weighted average number of shares outstanding 37,385 37,525 37,484 The accompanying notes to consolidated financial statements are an integral part of these statements. 26Table of ContentsHub Group, Inc.Consolidated Statements of Stockholders’ Equity(in thousands, except shares) Class A & BCommon Stock AdditionalPaid-in Capital Purchase Priceof Excess ofPredecesserBasis, Netof Tax RetainedEarnings AccumulatedOtherComprehensiveIncome TreasuryStock Total Shares Issued Amount Shares Amount Balance January 1, 2010 41,887,088 $419 $171,470 $(15,458) $299,552 $(9) (3,971,462) $(102,133) $353,841 Purchase of treasury shares — — — — — — (839,448) (25,070) (25,070) Issuance of restricted stock awards, net offorfeitures — — (5,024) — — — 194,677 5,024 — Share-based compensation expense — — 3,576 — — — — — 3,576 Exercise of non-qualified options — — (734) — — — 29,800 780 46 Tax benefit of share-based compensationplans — — 434 — — — — — 434 Net income — — — — 43,458 — — — 43,458 Foreign currency translation adjustment — — — — — 15 — — 15 Comprehensive income — — — — — — — — 43,473 Balance December 31, 2010 41,887,088 $419 $169,722 $(15,458) $343,010 $6 (4,586,433) $(121,399) $376,300 Balance January 1, 2009 41,887,088 $419 $174,355 $(15,458) $265,287 $— (4,254,445) $(109,419) $315,184 Purchase of treasury shares — — — — — — (43,408) (1,101) (1,101) Issuance of restricted stock awards, net offorfeitures — — (5,166) — — — 201,091 5,166 — Share-based compensation expense — — 4,394 — — — — — 4,394 Exercise of non-qualified options — — (2,965) — — — 125,300 3,221 256 Tax benefit of share-based compensationplans — — 852 — — — — — 852 Net income — — — — 34,265 — — — 34,265 Foreign currency translation adjustment — — — — — (9) — — (9) Comprehensive income — — — — — — — — 34,256 Balance December 31, 2009 41,887,088 $419 $171,470 $(15,458) $299,552 $(9) (3,971,462) $(102,133) $353,841 Balance January 1, 2008 41,887,088 $419 $176,657 $(15,458) $206,042 $— (4,558,061) $(116,761) $250,899 Purchase of treasury shares — — — — — — (85,361) (2,630) (2,630) Issuance of restricted stock awards, net offorfeitures — — (5,480) — — — 213,645 5,480 — Share-based compensation expense — — 4,360 — — — — — 4,360 Exercise of non-qualified options — — (4,085) — — — 175,332 4,492 407 Tax benefit of share-based compensationplans — — 2,903 — — — — — 2,903 Net income — — — — 59,245 — — — 59,245 Foreign currency translation adjustment — — — — — — — — — Comprehensive income — — — — — — — — 59,245 Balance December 31, 2008 41,887,088 $419 $174,355 $(15,458) $265,287 $— (4,254,445) $(109,419) $315,184 The accompanying notes to consolidated financial statements are an integral part of these statements. 27Table of ContentsHUB GROUP, INC.CONSOLIDATED STATEMENTS OF CASH FLOWS(in thousands) Years Ended December 31, 2010 2009 2008 Cash flows from operating activities: Net Income $43,458 $34,265 $59,245 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 8,572 8,199 7,369 Deferred taxes 9,545 5,519 9,294 Compensation expense related to share-based compensation plans 3,576 4,394 4,360 Loss (gain) on sale of assets 85 50 (22) Changes in operating assets and liabilities: Restricted investments (1,838) (3,465) (912) Accounts receivable, net (46,582) (1,569) 15,092 Prepaid taxes 298 (470) (37) Prepaid expenses and other current assets 233 (2,455) (28) Other assets 298 (72) (374) Accounts payable 12,822 7,150 (18,532) Accrued expenses 5,277 (8,603) (13,040) Non-current liabilities 1,910 2,285 (908) Net cash provided by operating activities 37,654 45,228 61,507 Cash flows from investing activities: Proceeds from sale of equipment 988 84 1,342 Purchases of property and equipment (25,616) (4,246) (10,732) Cash used in acquisitions (170) — (5,000) Net cash used in investing activities (24,798) (4,162) (14,390) Cash flows from financing activities: Proceeds from stock options exercised 46 256 407 Purchase of treasury stock (25,070) (1,101) (2,630) Excess tax benefits from share-based compensation 434 852 2,903 Net cash (used in) provided by financing activities (24,590) 7 680 Effect of exchange rate changes on cash and cash equivalents 15 (9) — Net (decrease) increase in cash and cash equivalents (11,719) 41,064 47,797 Cash and cash equivalents beginning of year 126,863 85,799 38,002 Cash and cash equivalents end of year $115,144 $126,863 $85,799 Supplemental disclosures of cash paid for: Interest $54 $91 $102 Income taxes $16,031 $17,263 $27,199 The accompanying notes to consolidated financial statements are an integral part of these statements. 28Table of ContentsHUB GROUP, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1.Description of Business and Summary of Significant Accounting PoliciesBusiness: Hub Group, Inc. (“we”, “us” or “our”) provides intermodal transportation services utilizing primarily third party arrangements with railroads.Drayage can be provided by our subsidiary, Comtrak, or a third party company. We also arrange for transportation of freight by truck and perform logisticsservices.Principles of Consolidation: The consolidated financial statements include our accounts and all entities in which we have more than a 50% equity ownershipor otherwise exercise unilateral control. All significant intercompany balances and transactions have been eliminated.Cash and Cash Equivalents: We consider as cash equivalents all highly liquid instruments with an original maturity of three months or less. We invested ourcash in a money market fund comprised of U.S. treasury securities and repurchase agreements for these securities. The outstanding balances were $114.6million and $125.2 million as of December 31, 2010 and 2009, respectively.Accounts Receivable and Allowance for Uncollectible Accounts: In the normal course of business, we extend credit to customers after a review of eachcustomer’s credit history. An allowance for uncollectible trade accounts has been established through an analysis of the accounts receivable aging, anassessment of collectibility based on historical trends and an evaluation based on current economic conditions. To be more specific, we reserve a portion ofevery account balance that has aged over one year, a portion of receivables for customers in bankruptcy and certain account balances specifically identified asuncollectible. On an annual basis we perform a hindsight analysis to determine our experience in collecting account balances over one year old and accountbalances in bankruptcy. We then use this hindsight analysis to establish our reserves for receivables over one year and in bankruptcy. In establishing a reservefor certain account balances specifically identified as uncollectible, we consider the aging of the customer receivables, the customer’s current and projectedfinancial results, the customer’s ability to meet and sustain their financial commitments, the positive or negative effects of the current and projected industryoutlook and the general economic conditions. The allowance for uncollectible accounts is reported on the balance sheet in net accounts receivable. Our reservefor uncollectible accounts was approximately $3.9 million and $4.6 million as of December 31, 2010 and 2009, respectively. Receivables are written off oncecollection efforts have been exhausted. Recoveries of receivables previously charged off are recorded when received.Property and Equipment: Property and equipment are stated at cost. Depreciation of property and equipment is computed using the straight-line method atrates adequate to depreciate the cost of the applicable assets over their expected useful lives: building and improvements, 1 to 8 years; leasehold improvements,the shorter of useful life or lease term; computer equipment and software, 3 to 5 years; furniture and equipment, 3 to 10 years; and transportation equipmentand automobiles, 5 to 10 years. Direct costs related to internally developed software projects are capitalized and amortized over their expected useful life on astraight-line basis not to exceed five years. Interest is capitalized on qualifying assets under development for internal use. Maintenance and repairs are chargedto operations as incurred and major improvements are capitalized. The cost of assets retired or otherwise disposed of and the accumulated depreciation thereonare removed from the accounts with any gain or loss realized upon sale or disposal charged or credited to operations. We review long-lived assets forimpairment when events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. In the event that the undiscounted futurecash flows resulting from the use of the asset group is less than the carrying amount, an impairment loss equal to the excess of the assets carrying amount overits fair value, less cost to dispose, is recorded.Goodwill and Other Intangibles: Goodwill represents the excess of purchase price over the fair market value of net assets acquired in connection with ourbusiness combinations. Goodwill and intangible assets that have indefinite useful lives are not amortized but are subject to annual impairment tests. 29Table of ContentsWe review goodwill and other indefinite-lived intangibles for impairment as of November 1 or whenever events or changes in circumstances indicate thecarrying amount of goodwill or other indefinite-lived intangibles may not be recoverable. An indefinite lived intangible asset is impaired if its fair value is lessthan its carrying value. Goodwill impairment is indicated if the fair value of the reporting unit is less than its carrying value. An impairment loss is measuredas the difference between the implied fair value of the reporting unit’s goodwill and the carrying amount of goodwill. We utilize a third party independentvaluation firm to assist in performing the necessary valuations to be used in the impairment testing. These valuations are based on a market comparableapproach, a discounted cash flow approach or a combination of both approaches. The fair value measurement is determined based on assumptions that amarket participant would use including expectations regarding future operating performance (which are consistent with our internal projections and operatingplans), discount rates, control premiums and other factors which are subjective in nature. As of December 31, 2010, reasonable variations in theseassumptions do not have a significant impact on the results of the goodwill impairment test. Actual cash flows from operations could differ frommanagement’s estimates due to changes in business conditions, operating performance and economic conditions.We evaluate the potential impairment of finite-lived acquired intangible assets when impairment indicators exist. If the carrying value is no longer recoverablebased upon the undiscounted future cash flows of the asset, the amount of the impairment is the difference between the carrying amount and the fair value ofthe asset.Concentration of Credit Risk: Our financial instruments that are exposed to concentrations of credit risk consist primarily of cash and cash equivalents andaccounts receivable. We place our cash and temporary investments with high quality financial institutions and invest our cash overnight in a money marketfund comprised of U.S. Treasury Securities and repurchase agreements for these securities. We primarily serve customers located throughout the UnitedStates with no significant concentration in any one region. No one customer accounted for more than 10% of revenue in 2010, 2009 or 2008. We review acustomer’s credit history before extending credit. In addition, we routinely assess the financial strength of our customers and, as a consequence, believe thatour trade accounts receivable risk is limited.Revenue Recognition: Revenue is recognized at the time 1) persuasive evidence of an arrangement exists, 2) services have been rendered, 3) the sales price isfixed and determinable and 4) collectibility is reasonably assured. Revenue and related transportation costs are recognized based on relative transit time.Further, 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. Ourcustomers view us as responsible for fulfillment including the acceptability of the service. Services 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 settingsales 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 servicesordered by our customers. Finally, we have credit risk for our receivables. These three factors, discretion in setting prices, discretion in selecting vendors andcredit risk, further support reporting revenue on a gross basis.Provision for Income Taxes: Deferred income taxes are recognized for the future tax effects of temporary differences between financial and income taxreporting using tax rates in effect for the years in which the differences are expected to reverse. We believe that it is more likely than not that our deferred taxassets will be realized based on future taxable income projections with the exception of $0.4 million related to state tax net operating losses for which a valuationallowance has been established. In the event the probability of realizing the remaining deferred tax assets do not meet the more likely than not threshold in thefuture, a valuation allowance would be established for the deferred tax assets deemed unrecoverable.Tax liabilities are recorded when, in management’s judgment, a tax position does not meet the more likely than not threshold for recognition as prescribed bythe guidance. For tax positions that meet the more likely than not threshold, a tax liability may be recorded depending on management’s assessment of how thetax position will ultimately be settled. We recognize interest expense and penalties related to income tax liabilities in our provision for income taxes.Earnings Per Common Share: Basic earnings per common share are based on the average quarterly weighted average number of Class A and Class B sharesof common stock outstanding. Diluted earnings per common share are adjusted for the assumed exercise of dilutive stock options and for restricted stockwhich are both computed using the treasury stock method.Stock Based Compensation: Share-based compensation includes the restricted stock awards expected to vest based on the grant date fair value. Compensationexpense is amortized straight-line over the vesting period including an estimate of forfeitures and is included in salaries and benefits. We present excess taxbenefits resulting from the exercise of share-based compensation as financing cash in-flows and as operating cash out-flows in the Statement of Cash Flows. 30Table of ContentsNew Pronouncements: In June 2009, the FASB issued amendments to the guidance on variable interest entities and consolidation, codified primarily in theConsolidation Topic of the FASB ASC. This guidance modifies the method for determining whether an entity is a variable interest entity as well as themethods permitted for determining the primary beneficiary of a variable interest entity. In addition, this guidance requires ongoing reassessments of whether acompany is the primary beneficiary of a variable interest entity and enhanced disclosures related to a company’s involvement with a variable interest entity.The Company adopted this guidance effective January 1, 2010, as required. The adoption of this standard did not impact our financial statements.In December 2010, the FASB issued guidance in the business combinations topic of codification. This guidance amends certain existing and addsadditional pro forma disclosure requirements for public enterprises. This guidance is effective for business combinations for which the acquisition date is onor after the beginning of the first annual reporting beginning on or after December 15, 2010. Any impact would be on future acquisitions.Use of Estimates: The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires us to make estimates andassumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statementsand the reported amounts of revenue and expense during the reporting period. Significant estimates include the allowance for doubtful accounts, and the cost oftransportation. Actual results could differ from those estimates.Reclassifications: Certain prior year amounts have been reclassified to conform to the current year presentation. NOTE 2.Capital StructureWe have authorized common stock comprised of Class A Common Stock and Class B Common Stock. The rights of holders of Class A CommonStock and Class B Common Stock are identical, except each share of Class B Common Stock entitles its holder to approximately 80 votes, while each shareof Class A Common Stock entitles its holder to one vote. We have authorized 2,000,000 shares of preferred stock. NOTE 3.Earnings Per ShareThe following is a reconciliation of our earnings per share (in thousands, except for per share data): Years Ended, December 31, 2010 2009 2008 Net income for basic and diluted earnings per share $43,458 $34,265 $59,245 Weighted average shares outstanding - basic 37,223 37,367 37,174 Dilutive effect of stock options and restricted stock 162 158 310 Weighted average shares outstanding - diluted 37,385 37,525 37,484 Earnings per share - basic $1.17 $0.92 $1.59 Earnings per share - diluted $1.16 $0.91 $1.58 NOTE 4.Fair Value MeasurementThe carrying value of cash and cash equivalents, accounts receivable and accounts payable approximated fair value as of December 31, 2010 and 2009due to their short-term nature.Cash and cash equivalents included $114.6 million and $125.2 million as of December 31, 2010 and 2009, respectively, invested in a money marketfund comprised of U.S. treasury securities and repurchase agreements for these securitiesRestricted investments included $11.4 million and $9.6 million as of December 31, 2010 and 2009, respectively, of mutual funds which are reported atfair value. 31Table of ContentsThe fair value measurement of these securities is based on quoted prices in active markets for identical assets which are defined as “Level 1” of the fairvalue hierarchy in the Fair Value Measurements and Disclosures Topic of the Codification. NOTE 5.Property and EquipmentProperty and equipment consist of the following (in thousands): December 31, 2010 2009 Building and improvements $72 $72 Leasehold improvements 2,222 2,174 Computer equipment and software 53,317 52,302 Furniture and equipment 8,141 8,077 Transportation equipment 54,316 30,551 118,068 93,176 Less: Accumulated depreciation and amortization (70,262) (64,666) Property and Equipment, net $47,806 $28,510 Depreciation expense was $8.0 million, $7.8 million and $6.9 million for 2010, 2009 and 2008, respectively. NOTE 6.Income TaxesThe following is a reconciliation of our effective tax rate to the federal statutory tax rate: Years Ended December 31, 2010 2009 2008 U.S. federal statutory rate 35.0% 35.0% 35.0% State taxes, net of federal benefit 2.5 2.6 2.7 Nondeductible expenses 1.1 0.5 0.6 Provision for valuation allowance — 0.4 — California law change (0.3) 0.4 — Other (0.3) (0.2) 0.2 Net effective rate 38.0% 38.7% 38.5% We, and our subsidiaries, file both unitary and separate company state income tax returns.The following is a summary of our provision for income taxes (in thousands): Years Ended December 31, 2010 2009 2008 Current Federal $14,959 $14,700 $25,197 State and local 2,303 1,619 2,590 Foreign 47 — — 17,309 16,319 27,787 Deferred Federal 9,411 4,560 8,651 State and local (85) 741 643 9,326 5,301 9,294 Total provision $26,635 $21,620 $37,081 32Table of ContentsThe following is a summary of our deferred tax assets and liabilities (in thousands): December 31, 2010 2009 Reserve for uncollectible accounts receivable $1,363 $1,721 Accrued compensation 4,217 2,792 Other reserves 2,618 2,393 Current deferred tax assets 8,198 6,906 Accrued compensation 4,376 3,739 Other reserves 1,020 842 Operating loss carryforwards 415 390 Income tax basis in excess of financial basis of goodwill 150 870 Less valuation allowance (379) (379) Long-term deferred tax assets 5,582 5,462 Total deferred tax assets $13,780 $12,368 Prepaids $(1,614) $(1,374) Other receivables (3,270) (2,658) Current deferred tax liabilities (4,884) (4,032) Property and equipment (12,332) (7,322) Goodwill (64,989) (60,113) Long-term deferred tax liabilities (77,321) (67,435) Total deferred tax liabilities $(82,205) $(71,467) Our state tax net operating losses of $415,000 expire between December 31, 2012 and December 31, 2030. Management believes it is more likely than notthat the deferred tax assets will be realized with the exception of $379,000 related to state tax net operating losses for which a valuation allowance has beenestablished.As of December 31, 2010 and 2009, the amount of unrecognized tax benefits was $0.7 million and $0.5 million, of which $0.4 million and $0.3 millionwould decrease our income tax provision, respectively, if recognized. A reconciliation of the beginning and ending amount of unrecognized tax benefits is asfollows (in thousands): Balance at January 1, 2008 $256 Additions for tax positions taken in prior years 80 Balance at December 31, 2008 $336 Additions based on tax positions related to the current year 118 Additions for tax positions taken in prior years 199 Reductions for tax positions taken in prior years (80) Reductions as a result of a lapse of the applicable statute of limitations (55) Balance at December 31, 2009 $518 Additions based on tax positions related to the current year 239 Reductions as a result of a lapse of the applicable statute of limitations (102) Balance at December 31, 2010 $655 We are subject to income tax in the U.S. federal jurisdiction, numerous state jurisdictions and Mexico. Our 2008 and 2009 tax years are currently underexamination by the IRS. California, Illinois, Maryland and Michigan are currently examining various tax years. Although no other significant examinations arecurrently in effect, tax years 2007 through 2009 generally 33Table of Contentsremain open to examination by the major tax jurisdictions to which we are subject. In 2010, New York and Texas conducted audits of our 2006 through 2008tax years and 2007 through 2008 tax years, respectively. Both examinations resulted in no change. During the next twelve months, it is reasonably possible wewill both reduce unrecognized tax benefits by approximately $0.1 million as a result of expiration of state statutes of limitations and increase unrecognized taxbenefits by approximately $0.1 million as a result of state income tax apportionment uncertainty. NOTE 7.Long-Term Debt and Financing ArrangementsOn March 3, 2010, we entered into an amendment to our Credit Agreement which reduced our maximum unsecured borrowing capacity under the CreditAgreement from $50.0 million to $10.0 million and extended the term of the Credit Agreement until March 2013. The interest rate of the Credit Agreement isequal to LIBOR plus 1.75%. The financial covenants require a minimum net worth of $275.0 million and a cash flow leverage ratio of not more than 2.0 to1.0. The commitment fee charged on the unused line of credit is 0.375%.Our unused and available borrowings under our bank revolving line of credit were $7.4 million as of December 31, 2010 and $47.1 million as ofDecember 31, 2009. We were in compliance with our debt covenants as of December 31, 2010.We have standby letters of credit that expire from 2011 to 2012. As of December 31, 2010, our letters of credit were $2.6 million. NOTE 8.Rental Expense, User Charges and CommitmentsMinimum annual rental commitments, as of December 31, 2010, under non-cancelable operating leases, principally for containers and equipment andreal estate are payable as follows (in thousands): 2011 $16,276 2012 12,469 2013 5,127 2014 1,479 2015 850 2016 and thereafter 120 $36,321 Total rental expense included in general and administrative expense, which relates primarily to real estate, was approximately $8.0 million, $8.0 millionand $8.3 million for 2010, 2009 and 2008, respectively. Many of the real estate leases contain renewal options and escalation clauses which require paymentsof additional rent to the extent of increases in the related operating costs. We straight-line rental expense in accordance with the FASB guidance in the LeasesTopic of the Codification.We incur rental expense for our leased containers and tractors that are included in transportation costs and totaled $9.3 million, $11.5 million, and$12.1 million for 2010, 2009 and 2008, respectively.We incur charges for use of a fleet of rail owned chassis and dedicated rail owned containers on the Union Pacific and Norfolk Southern which areincluded in transportation costs. Such charges were $54.0 million, $50.1 million and $45.4 million for 2010, 2009 and 2008, respectively. As ofDecember 31, 2010, we have the ability to return the majority of the containers and pay for the chassis only when we are using them under these agreements.As a result, no minimum commitments related to these chassis and containers have been included in the table above.On October 11, 2010, we entered into an Equipment Purchase Contract with Singamas Management Services, Ltd. for the acquisition of 3,000 53’containers. We have not yet decided if we will lease or buy the containers. In the event we purchase the containers, we expect the costs to be approximately$33.0 million. We expect to take delivery of the equipment between May and September 2011. NOTE 9.Stock-Based Compensation PlansIn 1996, we adopted a Long-Term Incentive Plan (the “1996 Incentive Plan”). The number of shares of Class A Common Stock reserved for issuanceunder the 1996 Incentive Plan was 1,800,000. In 1997, we adopted a second Long-Term Incentive Plan (the “1997 Incentive Plan”). The number of shares ofClass A Common Stock reserved for issuance under the 1997 Incentive Plan was 600,000. In 1999 we adopted a third Long-Term Incentive Plan (the “1999Incentive Plan”). The number of shares of Class A Common Stock reserved for issuance under the 1999 Incentive Plan was 2,400,000. In 2002, we adopted afourth Long-Term Incentive Plan (the “2002 Incentive Plan”). The number of shares of Class A Common Stock reserved for issuance under the 2002 IncentivePlan was 2,400,000. In 2003, we amended our 2002 Incentive Plan to add an additional 34Table of Contents2,000,000 shares of Class A Common Stock that are reserved for issuance. In 2007, we amended our 2002 Incentive Plan to add an additional 1,000,000shares of Class A Common Stock that are reserved for issuance. Under the 1996, 1997, 1999 and 2002 Incentive Plans, stock options, stock appreciationrights, restricted stock and performance units may be granted for the purpose of attracting and motivating our key employees and non-employee directors. Wehave not granted any stock options since 2003. Restricted stock vests over a three to five year period. As of December 31, 2010, 1,714,515 shares wereavailable for future grant. Generally, when stock options are exercised, either new shares are issued or shares are issued out of treasury.Share-based compensation expense for 2010, 2009 and 2008 was $3.6 million, $4.4 million and $4.4 million or $2.2 million, $2.7 million and $2.7million, net of taxes, respectively.The following table summarizes the stock option activity for the year ended December 31, 2010: Stock Options Shares WeightedAverageExercisePrice WeightedAverageRemainingContractualLife AggregateIntrinsicValue Outstanding at January 1, 2010 140,700 $1.75 Options exercised (29,800) $1.60 Options forfeited — $— Outstanding at December 31, 2010 110,900 $1.79 2.13 $3,698,946 Exercisable at December 31, 2010 110,900 $1.79 2.13 $3,698,946 Intrinsic value for stock options is defined as the difference between the current market value and the grant price. The total intrinsic value of optionsexercised during the years ended December 31, 2010, 2009 and 2008 was $0.9 million, $2.6 million and $5.4 million, respectively. Cash received from stockoptions exercised during the years ended December 31, 2010, 2009 and 2008 was $0.05 million, $0.3 million and $0.4 million, respectively. The tax benefitrealized for tax deductions from stock options exercised for the years ended December 31, 2010, 2009 and 2008 was $0.3 million, $1.0 million and $2.3million, respectively.The following table summarizes information about options outstanding as of December 31, 2010: Options Outstanding and Exercisable Range of Exercise Prices Numberof Shares Weighted Avg.RemainingContractual Life Weighted Avg.ExercisePrice $ 1.22 to $ 1.22 16,000 1.97 $1.22 $ 1.22 to $ 1.30 17,100 2.01 $1.28 $ 1.30 to $ 1.42 24,000 1.94 $1.42 $ 1.42 to $ 2.43 24,800 1.92 $1.86 $ 2.43 to $ 2.64 29,000 2.61 $2.64 $ 1.22 to $ 2.64 110,900 2.13 $1.79 The following table summarizes the non-vested restricted stock activity for the year ended December 31, 2010: Non-vested restricted stock Shares WeightedAverageGrant DateFair Value Non-vested January 1, 2010 474,033 $26.16 Granted 240,094 $27.36 Vested (165,557) $26.29 Forfeited (45,417) $25.50 Non-vested at December 31, 2010 503,153 $26.75 35Table of ContentsThe following table summarizes the restricted stock granted during the respective years: Restricted stock grants 2010 2009 2008 Employees 228,094 196,101 215,508 Outside directors 12,000 12,000 10,644 Total 240,094 208,101 226,152 Weighted average grant date fair value $27.36 $26.56 $26.16 Vesting period 3-5 years 3-5 years 3-5 years The fair value of non-vested restricted stock is equal to the market price of our stock at the date of grant.The total fair value of restricted shares vested during the years ended December 31, 2010, 2009 and 2008 was $4.5 million, $3.3 million and $3.9million, respectively.As of December 31, 2010, there was $10.2 million of unrecognized compensation cost related to non-vested share-based compensation that is expected tobe recognized over a weighted average period of 3.14 years.During January 2011, we granted 192,821 shares of restricted stock to certain employees and 12,000 shares of restricted stock to outside directors witha weighted average grant date fair value of $35.16. The stock vests over a three to five year period. NOTE 10.Business SegmentWe have no separately reportable segments. Under the enterprise wide disclosure requirements, we report revenue (in thousands), for Intermodal,Brokerage and Logistics Services as follows: Years Ended December 31, 2010 2009 2008 Intermodal $1,285,163 $1,054,862 $1,329,382 Brokerage 335,000 292,639 372,051 Logistics 213,574 163,469 159,175 Total revenue $1,833,737 $1,510,970 $1,860,608 NOTE 11.Employee Benefit PlansWe had one profit-sharing plan and trust as of December 31, 2010 and 2009 and two profit-sharing plans and trusts in 2008, all respectively undersection 401(k) of the Internal Revenue Code. At our discretion, we partially match qualified contributions made by employees to the plan. We expensedapproximately $1.3 million, $1.3 million and $1.8 million related to these plans in 2010, 2009, and 2008, respectively.In January 2005, we established the Hub Group, Inc. Nonqualified Deferred Compensation Plan (the “Plan”) to provide added incentive for the retentionof certain key employees. Under the Plan, participants can elect to defer certain compensation. Accounts will grow on a tax-deferred basis to the participant.Restricted investments included in the consolidated balance sheets represent the fair value of the mutual funds and other security investments related to thePlan as of December 31, 2010 and 2009. Both realized and unrealized gains and losses are included in income and expense and offset the change in thedeferred compensation liability. We provide a 50% match on the first 6% of employee compensation deferred under the Plan, with a maximum matchequivalent to 3% of base salary. In addition, we have a legacy deferred compensation plan. There are no new contributions being made into this legacy plan. Weexpensed $0.3 million, $0.4 million and $0.3 million related to the employer match for these plans in 2010, 2009 and 2008, respectively. The liabilities relatedto these plans as of December 31, 2010 and 2009 were $12.5 million and $11.8 million, respectively. 36Table of ContentsNOTE 12.Legal MattersWe are a party to litigation incident to our business, including claims for personal injury and/or property damage, freight lost or damaged in transit,improperly shipped or improperly billed. Some of the lawsuits to which we are party to are covered by insurance and are being defended by our insurancecarriers. Some of the lawsuits are not covered by insurance and we are defending them ourselves. Management does not believe that the outcome of thislitigation will have a materially adverse effect on our financial position or results of operations. NOTE 13.Stock Buy Back PlansOn February 24, 2010, our Board of Directors authorized the purchase of up to $30.0 million of our Class A Common Stock. This authorization expiresMarch 31, 2011. We purchased 784,197 shares under this authorization during the year ended December 31, 2010. We may make purchases from time totime as market conditions warrant, and any repurchased shares are expected to be held in treasury for future use.The following table displays the number of shares purchased during 2010 and the maximum value of shares that may yet be purchased under the plan: TotalNumber ofSharesPurchased AveragePrice PaidPer Share Total Number ofShares Purchased asPart of PubliclyAnnounced Plan Maximum Value ofShares that May YetBe Purchased Underthe Plan(in 000’s) January 1 to March 31 53,800 $27.46 53,800 $28,523 April 1 to June 30 326,350 $30.75 326,350 $18,486 July 1 to September 30 367,947 $29.44 367,947 $7,653 October 1 to 31 — $— — $7,653 November 1 to 30 — $— — $7,653 December 1 to 31 36,100 $34.30 36,100 $6,414 Total 784,197 $30.08 784,197 $6,414 This table excludes 55,251 shares we purchased for $1.5 million during the year ended December 31, 2010 related to employee withholding uponvesting of restricted stock. NOTE 14.Goodwill and Other Intangible AssetsIn accordance with the FASB issued guidance in the Intangibles-Goodwill and Other Topic of the Codification, we completed the required annualimpairment tests. No impairment charge was recognized based on the results of the annual goodwill impairment test and there were no accumulated impairmentlosses at the beginning of the period.The following table presents the carrying amount of goodwill (in thousands): Balance at January 1, 2009 $233,110 Other (218) Balance at December 31, 2009 $232,892 Acquisition 355 Other (218) Balance at December 31, 2010 $233,029 37Table of ContentsThe changes in the carrying amount of goodwill for 2009 relate to the amortization of the income tax benefit of tax goodwill in excess of financialstatement goodwill. The changes in the carrying amount of goodwill for 2010 are due primarily to the purchase of a small drayage company and theamortization of the income tax benefit of tax goodwill in excess of financial statement goodwill.The components of the “Other intangible assets” are as follows (in thousands): GrossAmount AccumulatedAmortization Net CarryingValue Life As of December 31, 2010: Relationships with owner operators $805 $(541) $264 2-6years Backlog/open orders 20 (20) — 1 month Trade name 2,904 — 2,904 Indefinite Customer relationships 3,823 (1,232) 2,591 15 years Information technology 500 (403) 97 6 years Total $8,052 $(2,196) $5,856 As of December 31, 2009: Relationships with owner operators $647 $(413) $234 6 years Backlog/open orders 20 (20) — 1 month Trade name 2,904 — 2,904 Indefinite Customer relationships 3,823 (977) 2,846 15 years Information technology 500 (320) 180 6 years Total $7,894 $(1,730) $6,164 The above intangible assets will be amortized using the straight-line method. Amortization expense for each of the years ended December 31, 2010, 2009and 2008 was $0.5 million, $0.4 million and $0.4 million, respectively. Amortization expense for the next five years is as follows (in thousands): 2011 $521 2012 344 2013 253 2014 253 2015 253 NOTE 15.Restructuring ChargesIn 2009, we recorded restructuring charges of approximately $1.0 million. This consisted of severance charges for 132 employees in 2009.Approximately $13,000 of severance payments remained to be paid as of December 31, 2009. No severance payments remained to be paid as of December 21,2010.All severance charges are included in salaries and benefits in the Statements of Income.The following table displays the activity and balances of the restructuring reserves in the Consolidated Balance Sheets (in thousands): Balance at January 1, 2009 $— Restructuring expenses-severance 993 Cash payments made (879) Change in estimate (101) Balance at December 31, 2009 $13 Cash payments made (13) Balance at December 31, 2010 $— 38Table of ContentsNOTE 16.GuaranteesIn 2008 the California Air Resources Board (CARB) approved regulations that require significantly reduced emissions from existing on-road dieselvehicles operating in California. The regulations require older model tractors to be modified to comply with the new regulations. In response to the costsassociated with complying with these new emission laws, we developed a guaranty program with a leasing company. As part of this program, we areguaranteeing certain owner operators’ lease payments for these tractors. The guarantees expire at various dates beginning 2012 thru 2017.The potential maximum exposure under these lease guarantees was approximately $6.8 million and $3.8 million as of December 31, 2010 and 2009,respectively. The potential maximum exposure represents the amount of the remaining lease payments on all outstanding guaranteed leases as of December 31,2010 and 2009. However, upon default, we have the option to purchase the tractors. We could then sell the tractors and use the proceeds to recover all or aportion of the amounts paid under the guarantees. Alternatively, we can contract with another owner operator who would assume the lease. There were nomaterial defaults during the year ended December 31, 2010 and no potential material defaults.We had a liability of approximately $0.1 million as of both December 31, 2010 and 2009, for the guarantees representing the fair value of the guaranteesbased on a discounted cash-flow analysis. We are amortizing the amounts over the remaining lives of the respective guarantees. NOTE 17.Selected Quarterly Financial Data (Unaudited)The following table sets forth selected quarterly financial data for each of the quarters in 2010 and 2009 (in thousands, except per share amounts): Quarters First Second Third Fourth Year Ended December 31, 2010: Revenue $417,294 $458,113 $478,417 $479,913 Gross margin 48,818 50,576 57,397 56,642 Operating income 14,242 15,715 20,707 19,218 Net income 8,702 9,630 12,617 12,509 Basic earnings per share $0.23 $0.26 $0.34 $0.34 Diluted earnings per share $0.23 $0.26 $0.34 $0.34 Quarters First Second Third Fourth Year Ended December 31, 2009: Revenue $351,695 $362,613 $388,781 $407,881 Gross margin 45,169 45,763 48,200 46,558 Operating income 10,676 13,446 15,892 15,517 Net income 6,178 8,305 9,831 9,951 Basic earnings per share $0.17 $0.22 $0.26 $0.27 Diluted earnings per share $0.17 $0.22 $0.26 $0.26 Item 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURENone. 39Table of ContentsItem 9A.CONTROLS AND PROCEDURESMANAGEMENT’S REPORT ON DISCLOSURE CONTROLS AND PROCEDURESAs of December 31, 2010, an evaluation was carried out under the supervision and with the participation of our management, including our ChiefExecutive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures as defined in Rule 13a-15(f) and Rule 15d-15(f)under the Securities Exchange Act of 1934. Based upon this evaluation, the Chief Executive Officer and Chief Financial Officer concluded that thesedisclosure controls and procedures were effective.No significant changes were made in our internal control over financial reporting during the fourth quarter of 2010 that has materially affected, or isreasonably likely to materially affect, our internal control over financial reporting.Because of its inherent limitations, internal controls over financial reporting may not prevent or detect misstatements. Also, projections of any evaluationof effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliancewith the policies or procedures may deteriorate.MANAGEMENT’S ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTINGOur management is responsible for establishing and maintaining adequate controls over financial reporting as defined in Rule 13a-15(f) of the ExchangeAct. Under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, weconducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2010. Based on criteria established in InternalControl—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria), managementbelieves our internal controls over financial reporting was effective as of December 31, 2010.Management believes, however, that a control system, no matter how well designed and operated, cannot provide absolute assurance that the objectivesof the control system are met, and no evaluation controls can provide absolute assurance that all control issues and instances of fraud, if any, within theCompany have been detected.Ernst & Young LLP, an independent registered public accounting firm, who audited and reported on the consolidated financial statements, included inthis report, has issued an attestation report on the Company’s internal control over financial reporting. 40Table of ContentsREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON INTERNAL CONTROL OVER FINANCIAL REPORTINGThe Board of Directors and Stockholders of Hub Group, Inc.:We have audited Hub Group, Inc.’s internal control over financial reporting as of December 31, 2010, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). Hub Group Inc.’smanagement is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control overfinancial reporting included in the accompanying Management’s Annual Report on Internal Control Over Financial Reporting. Our responsibility is to expressan opinion on the company’s internal control over financial reporting based on our audit.We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require thatwe plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all materialrespects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testingand evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considerednecessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting andthe preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control overfinancial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflectthe transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are beingmade only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention ortimely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation ofeffectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliancewith the policies or procedures may deteriorate.In our opinion, Hub Group, Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2010, based on theCOSO criteria.We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheetsof Hub Group, Inc. as of December 31, 2010 and 2009 and the related consolidated statements of income, stockholders’ equity, and cash flows for each of thethree years in the period ended December 31, 2010 of Hub Group, Inc., and our report dated February 24, 2011 expressed an unqualified opinion thereon. Ernst & Young LLPChicago, IllinoisFebruary 24, 2011 Item 9B.OTHER INFORMATIONNone. 41Table of ContentsPART III Item 10.DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCEThe sections entitled “Election of Directors” and “Ownership of the Capital Stock of the Company” appearing in our proxy statement for our annualmeeting of stockholders to be held on May 6, 2011 sets forth certain information with respect to our directors and Section 16 compliance and is incorporatedherein by reference. Certain information with respect to persons who are or may be deemed to be our executive officers is set forth under the caption “ExecutiveOfficers of the Registrant” in Part I of this report.Our code of ethics can be found on our website at www.hubgroup.com. Item 11.EXECUTIVE COMPENSATIONThe section entitled “Compensation of Directors and Executive Officers” appearing in our proxy statement for our annual meeting of stockholders to beheld on May 6, 2011 sets forth certain information with respect to the compensation of our management and is incorporated herein by reference. Item 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDERMATTERSThe section entitled “Ownership of the Capital Stock of the Company” appearing in our proxy statement for our annual meeting of stockholders to beheld on May 6, 2011 sets forth certain information with respect to the ownership of our Common Stock and is incorporated herein by reference.Equity Compensation Plan InformationThe following chart contains certain information regarding the Company’s Long-Term Incentive Plans: Plan Category Number of securitiesto be issuedupon exercise ofoutstanding options,warrants and rights(a) Weighted-averageexercise price ofoutstanding options,warrants and rights Number of securitiesremaining available forfuture issuance underequity compensationplans (excludingsecurities reflected incolumn (a)) Equity compensation plans approved by security holders 110,900 $1.79 1,714,715 Equity compensation plans not approved by security holders — — — Total 110,900 $1.79 1,714,715 Item 13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCEThe sections entitled “Certain Transactions” and “Meetings and Committees of the Board” appearing in our proxy statement for the annual meeting ofour stockholders to be held on May 6, 2011 set forth certain information with respect to certain business relationships and transactions between us and ourdirectors and officers and the independence of our directors and is incorporated herein by reference. Item 14.PRINCIPAL ACCOUNTANT FEES AND SERVICESThe section entitled “Principal Accountant Fees and Services” appearing in our proxy statement for our annual meeting of stockholders to be held onMay 6, 2011 sets forth certain information with respect to certain fees we have paid to our principal accountant for services and is incorporated herein byreference. 42Table of ContentsItem 15.EXHIBITS AND FINANCIAL STATEMENT SCHEDULES(a) Financial StatementsThe following consolidated financial statements of the Registrant are included under Item 8 of this Form 10-K: Report of Independent Registered Public Accounting FirmConsolidated Balance Sheets - December 31, 2010 and December 31, 2009Consolidated Statements of Income - Years ended December 31, 2010, December 31, 2009 and December 31, 2008Consolidated Statements of Stockholders’ Equity - Years ended December 31, 2010, December 31, 2009 and December 31, 2008Consolidated Statements of Cash Flows - Years ended December 31, 2010, December 31, 2009 and December 31, 2008Notes to Consolidated Financial Statements(b) Financial Statement SchedulesThe following financial statement schedules of Hub Group, Inc. are filed as part of this report and should be read in conjunction with the consolidatedfinancial statements of Hub Group, Inc.: Page II. Valuation and qualifying accounts and reserves S-1 All other schedules are omitted because they are not required, are not applicable, or the required information is shown in the consolidated financialstatements or notes thereto.(c) ExhibitsThe exhibits included as part of this Form 10-K are set forth in the Exhibit Index immediately preceding such Exhibits and are incorporated herein byreference. 43Table of ContentsSIGNATURESPursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on itsbehalf by the undersigned, thereunto duly authorized. Date: February 24, 2011 HUB GROUP, INC. By /S/ DAVID P. YEAGER David P. Yeager Chairman and Chief Executive OfficerPursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons in the capacities and onthe dates indicated: Title Date/s/ David P. YeagerDavid P. Yeager Chairman and Chief Executive Officer February 24 2011/s/ Mark A. YeagerMark A. Yeager Vice Chairman, President and Chief Operating Officer February 24, 2011/s/ Terri A. PizzutoTerri A. Pizzuto Executive Vice President, Chief Financial Officer and Treasurer(Principal Financial and Accounting Officer) February 24, 2011/s/ Charles R. ReavesCharles R. Reaves Director February 24, 2011/s/ Martin P. SlarkMartin P. Slark Director February 24, 2011/s/ Gary D. EppenGary D. Eppen Director February 24, 2011Table of ContentsSCHEDULE IIHUB GROUP, INC.VALUATION AND QUALIFYING ACCOUNTSAllowance for uncollectible trade accounts Year ended December 31: Balance atBeginning ofYear Charged toCosts &Expenses Charged toOtherAccounts (1) Deductions (2) Balance AtEnd ofYear 2010 $4,607,000 $207,000 $(625,000) $(310,000) $3,879,000 2009 $5,102,000 $1,169,000 $(1,652,000) $(12,000) $4,607,000 2008 $5,456,000 $662,000 $(802,000) $(214,000) $5,102,000 Deferred tax valuation allowance Year ended December 31: Balance atBeginning ofYear Chargedto Costs &Expenses Balance atEnd ofYear 2010 $379,000 $— $379,000 2009 $163,000 $216,000 $379,000 2008 $163,000 $— $163,000 (1)Expected customer account adjustments charged to revenue and write-offs, net of recoveries(2)Represents bad debt recoveries. S-1Table of ContentsINDEX TO EXHIBITS Number Exhibit 3.1 Amended Certificate of Incorporation of the Registrant (incorporated by reference to Exhibit 3.1 to the Registrant’s quarterly report on Form 10-Qfiled July 23, 2007, File No. 000-27754) 3.2 By-Laws of the Registrant (incorporated by reference to Exhibit 3.2 to the Registrant’s registration statement on Form S-1, File No. 33-90210) 10.1 Amended and Restated Limited Partnership Agreement of Hub City Canada, L.P. (incorporated by reference to Exhibit 10.2 to the Registrantsreport on Form 10-K dated March 26, 1997 and filed March 27, 1997, File No 000-27754) 10.2 Stockholders’ Agreement (incorporated by reference to Exhibit 10.7 to the Registrant’s report on Form 10-K dated March 26, 1997 and filedMarch 27, 1997, File No. 000-27754) 10.3 Hub Group’s Nonqualified Deferred Compensation Plan Basic Plan Document as amended and restated as of January 1, 2008 (incorporated byreference to Exhibit 10.4 to the Registrant’s report on Form 10-K dated February 21, 2008 and filed February 22, 2008, File No. 000-27754) 10.4 Hub Group’s Nonqualified Deferred Compensation Plan Adoption Agreement as amended and restated as of January 1, 2008 (incorporated byreference to Exhibit 10.5 to the Registrant’s report on Form 10-K dated February 21, 2008 and filed February 22, 2008, File No. 000-27754) 10.5 Description of Executive Officer cash compensation for 2011 10.6 Director compensation for 2011 10.7 Hub Group’s 2002 Long Term Incentive Plan (as amended and restated effective May 7, 2007) (incorporated by reference from Appendix B to theRegistrant’s definitive proxy statement on Schedule 14A dated and filed March 26, 2007) 10.8 $40 million Credit Agreement dated as of March 23, 2005 among the Registrant, Hub City Terminals, Inc. and Harris Trust and Savings Bank(incorporated by reference to Exhibit 10.1 to the Registrant’s report on Form 8-K dated March 23, 2005 and filed March 25, 2005, File No. 000-27754) 10.9 Lease Agreement dated as of May 10, 2005, between Banc of America Leasing & Capital, LLC and Hub City Terminals, Inc., with form ofSchedule thereto (incorporated by reference to Exhibit 10.1 to the Registrant’s report on Form 8-K dated May 10, 2005 and filed May 16, 2005,File No. 000-27754) 10.10 Guaranty of Corporation, dated as of May 10, 2005, made by Registrant to, and for the benefit of, Banc of America Leasing & Capital, LLC(incorporated by reference to Exhibit 10.2 to the Registrant’s report on Form 8-K dated May 10, 2005 and filed May 16, 2005, File No. 000-27754) 10.11 Amendment to the $40 million Credit Agreement among the Registrant, Hub City Terminals, Inc. and Harris Trust and Savings Bank datedFebruary 21, 2006 (incorporated by reference to Exhibit 10.16 to the Registrant’s report on Form 10-K for the year ended December 31, 2005 andfiled February 27, 2006, File No. 000-27754) 10.12 Form of Terms of Restricted Stock Award under Hub Group, Inc. 2002 Long-Term Incentive Plan (incorporated by reference to Exhibit 10.2 to theRegistrant’s report on Form 8-K dated May 22, 2006 and filed May 26, 2006, File No. 000-27754) 10.13 Third Amendment to Credit Agreement, dated as of March 3, 2010, among Hub Group, Inc., Hub City Terminals, Inc., Harris N.A. and Bankof Montreal (incorporated by reference to Exhibit 10.1 to the Registrant’s report on Form 8-K dated March 3, 2010 and filed March 5, 2010, FileNo. 000-27754) 10.14 Equipment Purchase Contract, dated as of April 8, 2010, by and between Hub City Terminals, Inc. and Singamas Management Services, Ltd.(incorporated by reference to Exhibit 10.1 to the Registrant’s report on Form 8-K dated April 8, 2010 and filed April 13, 2010, File No. 000-27754)Table of Contents 14 Hub Group’s Code of Business Conduct and Ethics (incorporated by reference from Exhibit 99.2 to the Registrant’s report on Form 10-K datedMarch 12, 2003 and filed on March 13, 2003, File No. 000-27754) 21 Subsidiaries of the Registrant 23.1 Consent of Ernst & Young LLP 31.1 Certification of David P. Yeager, Chairman and Chief Executive Officer, Pursuant to Rule 13a- 14(a) promulgated under the Securities ExchangeAct of 1934 31.2 Certification of Terri A. Pizzuto, Executive Vice President, Chief Financial Officer and Treasurer, Pursuant to Rule 13a-14(a) promulgated underthe Securities Exchange Act of 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 1350101 The following financial statements from our Annual Report on Form 10-K for the year ended December 31, 2010, filed on February 24, 2011,formatted in XBRL: (i) Consolidated Balance Sheets as of December 31, 2010 and 2009, (ii) Consolidated Statements of Income for the yearsended December 31, 2010, 2009, and 2008, (iii) Consolidated Statements of Cash Flows for the years ended December 31, 2010, 2009 and 2008,(iv) Consolidated Statements of Stockholders’ Equity for the years ended 2010, 2009, and 2008, and (v) the Notes to the Consolidated FinancialStatements, tagged as blocks of text.Exhibit 10.5Hub Group, Inc.Description of Executive Officer Cash CompensationFor 2011Annual Cash CompensationBase SalarySet forth below are the 2011 base salaries of the Chief Executive Officer and each of the four most highly compensated executive officers in 2010. TheCompany considers various factors in assigning executive officers to specific salary ranges, including job content, level of responsibility, accountability, andthe competitive compensation market. On an annual basis, all executive officers’ salaries are reviewed and adjusted to reflect individual performance andposition within their respective ranges.Bonus PlanExecutive officers are eligible for annual performance-based awards under the Company’s bonus plan, as are all salaried employees. For 2010, goalswere weighted upon achievement of targeted levels of earnings per share and, for some executives, upon achievement of personal goals. The goals for 2011 willalso be similarly weighted.Restricted StockThe Company makes periodic grants of restricted stock to executive officers. The grants of restricted stock made in early 2011 vest in equalinstallments over a five year period beginning a year from the grant date. David P. YeagerChairman and Chief Executive Officer Base 2011 $625,000 Mark A. YeagerVice Chairman, President and Chief Operating Officer Base 2011 $500,000 Terri A. PizzutoExecutive Vice President, Chief Financial Officer and Treasurer Base 2011 $335,000 Christopher R. KravasChief Intermodal Officer Base 2011 $325,000 David L. MarshChief Marketing Officer Base 2011 $325,000 Exhibit 10.6Hub Group, Inc.Directors’ Compensation For 2011Directors’ CompensationEach non-employee director receives an annual retainer fee of $65,000 in 2011, paid in quarterly installments. In addition, expenses are paid forattendance at each Committee meeting. Directors who are also officers or employees of the Company receive no compensation for duties performed as a director.Stock PlanThe Company makes periodic grants of restricted stock to the directors. In connection with their 2011 compensation package, each independent directorreceived 4,000 shares of restricted stock in January 2011. These shares vest over three years.Exhibit 21Subsidiaries of Hub Group, Inc. SUBSIDIARIES JURISDICTION OF INCORPORATION/ORGANIZATIONHub City Terminals, Inc. DelawareHub Group Atlanta, LLC DelawareHub Group Canada, L.P. DelawareHub Group Associates, Inc. IllinoisQuality Services L.L.C. MissouriHub Chicago Holdings, Inc. DelawareHub Group Transport, LLC DelawareHub Freight Services, Inc. DelawareComtrak Logistics, Inc. DelawareHGNA Group de Mexico, S. de RL de C.V. MexicoExhibit 23.1Consent of Independent Registered Public Accounting FirmWe consent to the incorporation by reference in the Registration Statements (Forms S-8 Nos. 333-146951, 333-115576 and 333-103845) pertaining to the HubGroup, Inc. 2002 Long Term Incentive Plan, Form S-8 No. 333-107745 pertaining to the Hub Group Employee Profit Sharing Plan and Trust, Form S-8No. 333-33006 pertaining to the Hub Group, Inc. 1999 Long-Term Incentive Plan and Form S-8 No. 333-48185 pertaining to the Hub Group, Inc. 1997 Long-Term Incentive Plan, of our reports dated February 24, 2011, with respect to the consolidated financial statements and schedule of Hub Group, Inc., and theeffectiveness of internal control over financial reporting of Hub Group, Inc., included in this Annual Report (Form 10-K) for the year ended December 31,2010. /s/ Ernst & Young LLPChicago, IllinoisFebruary 24, 2011Exhibit 31.1CERTIFICATIONI, David P. Yeager, certify that: 1)I have reviewed this report on Form 10-K of Hub Group, Inc.; 2)Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3)Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4)The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))for the registrant and have: a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under oursupervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us byothers within those entities, particularly during the period in which this report is being prepared; b)designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles; c)evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d)disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s mostrecent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financialreporting and; 5)The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function): a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which arereasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and b)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internalcontrol over financial reporting.Date: February 24, 2011 /s/ David P.YeagerName: David P. YeagerTitle: Chairman and Chief Executive OfficerExhibit 31.2CERTIFICATIONI, Terri A. Pizzuto, certify that: 1)I have reviewed this report on Form 10-K of Hub Group, Inc.; 2)Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3)Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4)The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))for the registrant and have: a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under oursupervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us byothers within those entities, particularly during the period in which this report is being prepared; b)designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles; c)evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d)disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s mostrecent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financialreporting and; 5)The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function): a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which arereasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and b)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internalcontrol over financial reporting.Date: February 24, 2011 /s/ Terri A. PizzutoName: Terri A. PizzutoTitle: Executive Vice President, Chief Financial Officer andTreasurerExhibit 32.1Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002The following statement is provided by the undersigned to accompany the Annual Report on Form 10-K for the year ended December 31, 2010 of HubGroup, Inc. pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350) and shall not be deemed filed pursuant to any provision of theExchange Act of 1934 or any other securities law.Each of the undersigned certifies that the foregoing Report on Form 10-K fully complies with the requirements of Section 13(a) of the Securities ExchangeAct of 1934 (15 U.S.C. 78m) and that the information contained in the Form 10-K fairly presents, in all material respects, the financial condition and resultsof operations of Hub Group, Inc. /s/ David P. Yeager /s/ Terri A. PizzutoDavid P. Yeager Terri A. PizzutoChairman and Chief Executive Officer Executive Vice President, Chief Financial Officer and Treasurer

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