x | Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the quarterly period ended June 30, 2016 | |
o | Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the transition period from _________ to _________ | |
Commission File Number 001-34470 |
Delaware | 20-5001120 | |
(State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification No.) | |
600 West Chicago Avenue Suite 725 Chicago, Illinois 60654 Phone: (800) 354-7993 (Address (including zip code) and telephone number (including area code) of registrant's principal executive offices) |
Large accelerated filer: x | Accelerated filer: o | Non-accelerated filer: o | Smaller reporting company o | |||
(Do not check if a smaller reporting company) |
Page | |||
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | ||
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Revenue | $ | 443,829,924 | $ | 371,642,242 | $ | 849,107,456 | $ | 655,133,816 | |||||||
Costs and expenses: | |||||||||||||||
Transportation costs | 358,652,347 | 302,100,945 | 683,103,064 | 532,340,803 | |||||||||||
Selling, general and administrative expenses | 70,532,891 | 61,450,284 | 140,009,379 | 105,478,097 | |||||||||||
Depreciation and amortization | 7,598,376 | 5,251,020 | 15,127,709 | 9,124,157 | |||||||||||
Income from operations | 7,046,310 | 2,839,993 | 10,867,304 | 8,190,759 | |||||||||||
Interest income | — | 23,909 | — | 23,909 | |||||||||||
Interest expense | (3,524,166 | ) | (4,350,256 | ) | (7,027,561 | ) | (4,388,224 | ) | |||||||
Other expense | — | (74,274 | ) | — | (126,295 | ) | |||||||||
Interest and other expense | (3,524,166 | ) | (4,400,621 | ) | (7,027,561 | ) | (4,490,610 | ) | |||||||
Income (Loss) before provision for income taxes | 3,522,144 | (1,560,628 | ) | 3,839,743 | 3,700,149 | ||||||||||
Income tax (expense) benefit | (1,591,375 | ) | 879,000 | (1,646,363 | ) | (1,054,000 | ) | ||||||||
Net income (loss) | $ | 1,930,769 | $ | (681,628 | ) | $ | 2,193,380 | $ | 2,646,149 | ||||||
Earnings (Loss) per common share: | |||||||||||||||
Basic | $ | 0.07 | $ | (0.03 | ) | $ | 0.08 | $ | 0.10 | ||||||
Diluted | $ | 0.07 | $ | (0.03 | ) | $ | 0.07 | $ | 0.10 |
June 30, 2016 | December 31, 2015 | ||||||
(Unaudited) | |||||||
Assets | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 40,114,570 | $ | 56,522,194 | |||
Accounts receivable, net of allowance for doubtful accounts of $1,536,287 and $1,627,315 at June 30, 2016 and December 31, 2015, respectively | 228,663,211 | 196,420,614 | |||||
Income taxes receivable | 2,852,406 | 1,038,327 | |||||
Prepaid expenses | 4,155,683 | 3,605,602 | |||||
Other current assets | 2,132,707 | 3,237,227 | |||||
Total current assets | 277,918,577 | 260,823,964 | |||||
Noncurrent assets: | |||||||
Property and equipment, net | 32,978,314 | 27,304,474 | |||||
Goodwill | 307,314,171 | 308,490,588 | |||||
Intangible assets, net of accumulated amortization of $34,759,406 and $26,785,810 at June 30, 2016 and December 31, 2015, respectively | 139,558,573 | 147,532,169 | |||||
Other noncurrent assets | 2,242,596 | 2,358,587 | |||||
Total noncurrent assets | 482,093,654 | 485,685,818 | |||||
Total assets | $ | 760,012,231 | $ | 746,509,782 | |||
Liabilities and stockholders' equity | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 133,142,622 | $ | 103,985,783 | |||
Due to seller, current | 1,002,449 | 2,338,462 | |||||
Accrued expenses | 30,607,684 | 30,283,062 | |||||
Other current liabilities | 1,729,327 | 784,829 | |||||
Total current liabilities | 166,482,082 | 137,392,136 | |||||
Noncurrent liabilities: | |||||||
Convertible notes, net | 200,057,163 | 196,659,354 | |||||
Due to seller, noncurrent | 845,051 | 1,748,235 | |||||
Other noncurrent liabilities | 8,294,032 | 2,940,435 | |||||
Deferred income taxes | 15,834,584 | 12,520,048 | |||||
Total noncurrent liabilities | 225,030,830 | 213,868,072 | |||||
Total liabilities | 391,512,912 | 351,260,208 | |||||
Stockholders' equity: | |||||||
Common stock, par value $0.0001 per share, 100,000,000 shares authorized, 30,218,653 shares issued and 28,651,997 shares outstanding at June 30, 2016; 29,765,525 shares issued and 29,727,588 shares outstanding at December 31, 2015 | 3,024 | 2,979 | |||||
Treasury stock, 1,566,656 and 37,937 shares at June 30, 2016 and December 31, 2015, respectively | (33,099,537 | ) | (784,829 | ) | |||
Additional paid-in capital | 322,373,282 | 319,002,254 | |||||
Retained earnings | 79,222,550 | 77,029,170 | |||||
Total stockholders' equity | 368,499,319 | 395,249,574 | |||||
Total liabilities and stockholders' equity | $ | 760,012,231 | $ | 746,509,782 |
Six Months Ended June 30, | |||||||
2016 | 2015 | ||||||
Operating activities | |||||||
Net income | $ | 2,193,380 | $ | 2,646,149 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Deferred income taxes | 2,150,016 | (929,157 | ) | ||||
Noncash stock compensation expense | 9,109,921 | 4,504,835 | |||||
Noncash interest expense | 3,752,278 | 1,264,153 | |||||
Change in contingent consideration due to seller | (152,954 | ) | 164,755 | ||||
Change in contingent consideration due from seller | 32,006 | — | |||||
Depreciation and amortization | 15,127,709 | 9,124,157 | |||||
Change in assets, net of acquisitions: | |||||||
Accounts receivable | (32,242,597 | ) | (16,168,721 | ) | |||
Income taxes receivable | (2,366,337 | ) | (170,379 | ) | |||
Prepaid expenses and other assets | 710,372 | (530,094 | ) | ||||
Change in liabilities, net of acquisitions: | |||||||
Accounts payable | 29,156,839 | 35,763,013 | |||||
Accrued expenses and other liabilities | 5,934,492 | (1,001,712 | ) | ||||
Net cash provided by operating activities | 33,405,125 | 34,666,999 | |||||
Investing activities | |||||||
Purchases of property and equipment | (12,827,953 | ) | (6,578,938 | ) | |||
Payments for acquisitions, net of cash acquired | — | (390,538,011 | ) | ||||
Net cash used in investing activities | (12,827,953 | ) | (397,116,949 | ) | |||
Financing activities | |||||||
Tax benefit of stock options exercised | 295,985 | 1,387,591 | |||||
Receipt of contingent consideration due from seller | 750,000 | — | |||||
Payment of contingent consideration due to seller | (2,086,243 | ) | (2,945,833 | ) | |||
Proceeds from exercise of stock options | 53,158 | 866,323 | |||||
Employee tax withholdings related to net share settlements of equity-based awards | (4,627,486 | ) | (1,624,229 | ) | |||
Purchases of treasury stock | (31,370,210 | ) | — | ||||
Proceeds from borrowing on line of credit | — | 34,782,500 | |||||
Repayments of amounts borrowed on line of credit | — | (34,782,500 | ) | ||||
Proceeds from borrowing on ABL facility | 11,000,000 | 35,000,000 | |||||
Repayments of amounts borrowed on ABL facility | (11,000,000 | ) | (5,000,000 | ) | |||
Proceeds from sale of common stock, net of underwriting discounts and commissions | — | 158,412,500 | |||||
Proceeds from issuance of convertible notes, net of underwriting discounts and commissions | — | 223,100,000 | |||||
Payment of common stock and debt issuance costs | — | (4,133,851 | ) | ||||
Payment to former owners of One Stop Logistics | — | (17,507,500 | ) | ||||
Net cash (used in) provided by financing activities | (36,984,796 | ) | 387,555,001 | ||||
(Decrease) Increase in cash and cash equivalents | (16,407,624 | ) | 25,105,051 | ||||
Cash and cash equivalents, beginning of period | 56,522,194 | 32,542,119 | |||||
Cash and cash equivalents, end of period | $ | 40,114,570 | $ | 57,647,170 |
Supplemental disclosure of cash flow information | |||||||
Cash paid during the year for interest | $ | 3,586,933 | $ | 2,165,738 | |||
Cash paid for income taxes | 1,665,710 | 1,867,055 | |||||
Noncash investing activity | |||||||
Issuance of common stock in connection with Command acquisition | $ | — | $ | 14,746,000 | |||
Noncash financing activity | |||||||
Fair value of due to seller obligation at acquisition date | $ | — | $ | 1,500,000 | |||
Liability for purchases of treasury stock not yet settled | 1,729,327 | — |
Common Stock | Additional Paid-In Capital | Treasury Stock | |||||||||||||||||||||||
Shares | Amount | Shares | Amount | Retained Earnings | Total | ||||||||||||||||||||
Balance at December 31, 2015 | 29,765,525 | $ | 2,979 | $ | 319,002,254 | (37,937 | ) | $ | (784,829 | ) | $ | 77,029,170 | $ | 395,249,574 | |||||||||||
Share compensation expense | — | — | 9,109,921 | — | — | — | 9,109,921 | ||||||||||||||||||
Exercise of stock options | 4,550 | — | 53,158 | — | — | — | 53,158 | ||||||||||||||||||
Common stock issued for vested restricted stock | 611,562 | 61 | (61 | ) | — | — | — | — | |||||||||||||||||
Common stock issued for vested performance shares | 37,547 | 4 | (4 | ) | — | — | — | — | |||||||||||||||||
Common shares withheld and retired to satisfy employee tax withholding obligations upon vesting of share-based awards | (200,531 | ) | (20 | ) | (4,627,466 | ) | — | — | — | (4,627,486 | ) | ||||||||||||||
Tax deficiency from exercise of stock options | — | — | (1,164,520 | ) | — | — | — | (1,164,520 | ) | ||||||||||||||||
Purchases of treasury stock | — | — | — | (1,528,719 | ) | (32,314,708 | ) | — | (32,314,708 | ) | |||||||||||||||
Net income | — | — | — | — | — | 2,193,380 | 2,193,380 | ||||||||||||||||||
Balance at June 30, 2016 | 30,218,653 | $ | 3,024 | $ | 322,373,282 | (1,566,656 | ) | $ | (33,099,537 | ) | $ | 79,222,550 | $ | 368,499,319 |
Cash | $ | 394,279,778 | |
Echo common stock, fair value | 14,746,000 | ||
Contingent consideration, fair value | (1,176,417 | ) | |
Working capital adjustment, December 2015 | (142,969 | ) | |
Total consideration transferred | $ | 407,706,392 |
Cash | $ | 9,495,246 | |
Accounts receivable, net | 62,398,350 | ||
Property and equipment | 3,667,615 | ||
Prepaid expenses | 818,903 | ||
Goodwill | 225,304,568 | ||
Intangible assets | 125,400,000 | ||
Total assets acquired | $ | 427,084,682 | |
Accounts payable | $ | 11,172,240 | |
Accrued expenses | 8,206,050 | ||
Total liabilities assumed | $ | 19,378,290 | |
Total consideration transferred | $ | 407,706,392 |
Intangible Asset | Value | Useful Life | ||
Customer relationships | $ | 97,200,000 | 17 years | |
Carrier relationships | 18,300,000 | 17 years | ||
Trade names | 5,000,000 | 4 years | ||
Noncompete agreements | 4,900,000 | 5-8 years | ||
$ | 125,400,000 |
• | Level 1: Inputs are quoted prices in active markets for identical assets or liabilities. |
• | Level 2: Inputs are quoted prices for similar assets or liabilities in an active market, quoted prices for identical or similar assets or liabilities in markets that are not active, and inputs other than quoted prices that are observable and market-corroborated inputs, which are derived principally from or corroborated by observable market data. |
• | Level 3: Inputs that are derived from valuation techniques in which one or more significant inputs or value drivers are unobservable. |
Fair Value Measurements as of June 30, 2016 | |||||||||||||
Total | Level 1 | Level 2 | Level 3 | ||||||||||
Liabilities: | |||||||||||||
Contingent consideration due to seller | $ | (1,847,500 | ) | — | — | $ | (1,847,500 | ) | |||||
Assets: | |||||||||||||
Contingent consideration due from seller | $ | 394,411 | — | — | $ | 394,411 |
Fair Value Measurements as of December 31, 2015 | |||||||||||||
Total | Level 1 | Level 2 | Level 3 | ||||||||||
Liabilities: | |||||||||||||
Contingent consideration due to seller | $ | (4,086,697 | ) | — | — | $ | (4,086,697 | ) |
Due to Seller Liability | |||
Balance at December 31, 2015 | $ | (4,086,697 | ) |
Change in contingent consideration due to seller | 152,954 | ||
Payment of contingent consideration due to seller | 2,086,243 | ||
Balance at June 30, 2016 | $ | (1,847,500 | ) |
Due from Seller Asset | |||
Balance at December 31, 2015 | $ | — | |
Command purchase price adjustment | 1,176,417 | ||
Receipt of contingent consideration due from seller | (750,000 | ) | |
Change in contingent consideration due from seller | (32,006 | ) | |
Balance at June 30, 2016 | $ | 394,411 |
Balance as of December 31, 2015 | $ | 308,490,588 | |
Command acquisition, purchase price adjustment | (1,176,417 | ) | |
Balance as of June 30, 2016 | $ | 307,314,171 |
June 30, 2016 | December 31, 2015 | Weighted-Average Life | |||||||
Customer relationships | $ | 145,138,979 | $ | 145,138,979 | 14.8 years | ||||
Carrier relationships | 18,300,000 | 18,300,000 | 17.0 years | ||||||
Noncompete agreements | 5,239,000 | 5,239,000 | 6.7 years | ||||||
Trade names | 5,640,000 | 5,640,000 | 4.0 years | ||||||
174,317,979 | 174,317,979 | 14.4 years | |||||||
Less accumulated amortization | (34,759,406 | ) | (26,785,810 | ) | |||||
Intangible assets, net | $ | 139,558,573 | $ | 147,532,169 |
Remainder of 2016 | $ | 7,830,833 | |
2017 | 14,243,799 | ||
2018 | 12,861,305 | ||
2019 | 11,470,909 | ||
2020 | 10,638,587 | ||
Thereafter | 82,513,140 | ||
Total | $ | 139,558,573 |
June 30, 2016 | December 31, 2015 | ||||||
Accrued compensation | $ | 17,047,829 | $ | 17,937,504 | |||
Accrued rebates | 2,585,455 | 2,535,606 | |||||
Accrued employee benefits | 2,822,762 | 2,809,239 | |||||
Accrued professional service fees | 1,227,715 | 1,837,749 | |||||
Accrued interest | 1,152,230 | 1,463,880 | |||||
Deferred rent | 1,202,567 | 400,809 | |||||
Other | 4,569,126 | 3,298,275 | |||||
Total accrued expenses | $ | 30,607,684 | $ | 30,283,062 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Income (Loss) before provision for income taxes | $ | 3,522,144 | $ | (1,560,628 | ) | $ | 3,839,743 | $ | 3,700,149 | ||||||
Income tax (expense) benefit | $ | (1,591,375 | ) | $ | 879,000 | $ | (1,646,363 | ) | $ | (1,054,000 | ) | ||||
Effective tax rate | 45.2 | % | 56.3 | % | 42.9 | % | 28.5 | % |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Numerator | |||||||||||||||
Net income (loss) | $ | 1,930,769 | $ | (681,628 | ) | $ | 2,193,380 | $ | 2,646,149 | ||||||
Denominator: | |||||||||||||||
Denominator for basic earnings (loss) per common share - weighted-average shares | 28,922,741 | 27,110,580 | 28,997,401 | 25,208,784 | |||||||||||
Effect of dilutive securities: | |||||||||||||||
Employee stock awards | 660,876 | — | 703,567 | 615,382 | |||||||||||
Denominator for dilutive earnings (loss) per common share | 29,583,617 | 27,110,580 | 29,700,968 | 25,824,166 | |||||||||||
Basic earnings (loss) per common share | $ | 0.07 | $ | (0.03 | ) | $ | 0.08 | $ | 0.10 | ||||||
Diluted earnings (loss) per common share | $ | 0.07 | $ | (0.03 | ) | $ | 0.07 | $ | 0.10 |
June 30, 2016 | |||
Convertible senior notes, principal amount | $ | 230,000,000 | |
Unamortized debt discount | (24,998,630 | ) | |
Unamortized debt issuance costs | (4,944,207 | ) | |
Convertible senior notes, net | $ | 200,057,163 |
Total | 2016 | 2017 | 2018 | 2019 | 2020 | |||||||||
Senior convertible notes, including interest | $ | 253,000,000 | 2,875,000 | 5,750,000 | 5,750,000 | 5,750,000 | $ | 232,875,000 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
(Unaudited) | |||||||||||||||
(in thousands, except per share data) | |||||||||||||||
Consolidated statements of operations data: | |||||||||||||||
Revenue | $ | 443,830 | $ | 371,642 | $ | 849,107 | $ | 655,134 | |||||||
Transportation costs | 358,652 | 302,101 | 683,103 | 532,341 | |||||||||||
Net revenue (1) | 85,178 | 69,541 | 166,004 | 122,793 | |||||||||||
Operating expenses: | |||||||||||||||
Commissions | 25,232 | 20,428 | 50,070 | 35,359 | |||||||||||
Selling, general and administrative expenses | 45,271 | 40,761 | 90,060 | 69,954 | |||||||||||
Contingent consideration expense (benefit) | 31 | 261 | (121 | ) | 165 | ||||||||||
Depreciation and amortization | 7,598 | 5,251 | 15,128 | 9,124 | |||||||||||
Total operating expenses | 78,132 | 66,701 | 155,137 | 114,602 | |||||||||||
Income from operations | 7,046 | 2,840 | 10,867 | 8,191 | |||||||||||
Interest expense | (3,524 | ) | (4,350 | ) | (7,027 | ) | (4,388 | ) | |||||||
Interest income and other expense | — | (51 | ) | — | (103 | ) | |||||||||
Income (Loss) before provision for income taxes | 3,522 | (1,561 | ) | 3,840 | 3,700 | ||||||||||
Income tax (expense) benefit | (1,591 | ) | 879 | (1,647 | ) | (1,054 | ) | ||||||||
Net income (loss) | $ | 1,931 | $ | (682 | ) | $ | 2,193 | $ | 2,646 | ||||||
Earnings (Loss) per common share: | |||||||||||||||
Basic | $ | 0.07 | $ | (0.03 | ) | $ | 0.08 | $ | 0.10 | ||||||
Diluted | $ | 0.07 | $ | (0.03 | ) | $ | 0.07 | $ | 0.10 | ||||||
Shares used in per share calculations (in thousands): | |||||||||||||||
Basic | 28,923 | 27,111 | 28,997 | 25,209 | |||||||||||
Diluted | 29,584 | 27,111 | 29,701 | 25,824 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
(Unaudited) | |||||||||||||||
(in thousands) | |||||||||||||||
Revenue | $ | 443,830 | $ | 371,642 | $ | 849,107 | $ | 655,134 | |||||||
Transportation costs | 358,652 | 302,101 | 683,103 | 532,341 | |||||||||||
Net revenue | $ | 85,178 | $ | 69,541 | $ | 166,004 | $ | 122,793 |
Operating Leases | |||
2016 | $ | 3,335,327 | |
2017 | 6,960,676 | ||
2018 | 7,617,032 | ||
2019 | 6,861,404 | ||
2020 | 6,537,995 | ||
Thereafter | 36,747,895 | ||
$ | 68,060,329 |
Date | Total Number of Shares Purchased | Average Price Paid Per Share | Total Number of Shares Purchased as Part of Publicly Announced Program (1) | Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under Program (1) | ||||||||||
4/1/16-4/30/16 | 226 | $ | 25.74 | — | $ | 30,609,197 | ||||||||
5/1/16-5/31/16 | 281,863 | $ | 22.33 | 268,844 | $ | 24,600,033 | ||||||||
6/1/16-6/30/16 | 457,024 | $ | 22.19 | 348,967 | $ | 16,900,463 | ||||||||
Total | 739,113 | $ | 22.24 | 617,811 |
Exhibit No | Description of Exhibit | ||
31.1 | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | ||
31.2 | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | ||
32.1 | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | ||
32.2 | Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | ||
101.INS** | XBRL Instance Document | ||
101.SCH** | XBRL Taxonomy Extension Schema Document | ||
101.CAL** | XBRL Taxonomy Extension Calculation Linkbase Document | ||
101.DEF** | XBRL Taxonomy Extension Definition Linkbase Document | ||
101.LAB** | XBRL Taxonomy Extension Label Linkbase Document | ||
101.PRE** | XBRL Taxonomy Extension Presentation Linkbase Document | ||
** Submitted electronically with this Quarterly Report on Form 10-Q |
ECHO GLOBAL LOGISTICS, INC. | |||||
Date: | July 28, 2016 | /s/ DOUGLAS R. WAGGONER | |||
By: | Douglas R. Waggoner Chairman and Chief Executive Officer | ||||
Date: | July 28, 2016 | /s/ KYLE L. SAUERS | |||
By: | Kyle L. Sauers Chief Financial Officer |
Number | Description | ||
31.1 | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | ||
31.2 | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | ||
32.1 | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | ||
32.2 | Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | ||
101.INS** | XBRL Instance Document | ||
101.SCH** | XBRL Taxonomy Extension Schema Document | ||
101.CAL** | XBRL Taxonomy Extension Calculation Linkbase Document | ||
101.DEF** | XBRL Taxonomy Extension Definition Linkbase Document | ||
101.LAB** | XBRL Taxonomy Extension Label Linkbase Document | ||
101.PRE** | XBRL Taxonomy Extension Presentation Linkbase Document | ||
** Submitted electronically with this Quarterly Report on Form 10-Q |
Date: | July 28, 2016 | /s/ DOUGLAS R. WAGGONER | |
Douglas R. Waggoner Chairman and Chief Executive Officer |
Date: | July 28, 2016 | /s/ KYLE L. SAUERS | |
Kyle L. Sauers Chief Financial Officer |
July 28, 2016 | /s/ DOUGLAS R. WAGGONER | |
Douglas R. Waggoner Chairman and Chief Executive Officer |
July 28, 2016 | /s/ KYLE L. SAUERS | |
Kyle L. Sauers Chief Financial Officer |
Document and Entity Information Document - shares |
6 Months Ended | |
---|---|---|
Jun. 30, 2016 |
Jul. 27, 2016 |
|
Document and Entity Information [Abstract] | ||
Entity Registrant Name | Echo Global Logistics, Inc. | |
Entity Central Index Key | 0001426945 | |
Current Fiscal Year End Date | --06-30 | |
Entity Filer Category | Large Accelerated Filer | |
Document Type | 10-Q | |
Document Period End Date | Jun. 30, 2016 | |
Document Fiscal Year Focus | 2016 | |
Document Fiscal Period Focus | Q2 | |
Amendment Flag | false | |
Entity Common Stock, Shares Outstanding | 29,306,145 |
Consolidated Statements of Operations (Unaudited) - USD ($) |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2016 |
Jun. 30, 2015 |
Jun. 30, 2016 |
Jun. 30, 2015 |
|
Income Statement [Abstract] | ||||
Revenue | $ 443,829,924 | $ 371,642,242 | $ 849,107,456 | $ 655,133,816 |
Costs and expenses: | ||||
Transportation costs | 358,652,347 | 302,100,945 | 683,103,064 | 532,340,803 |
Selling, general and administrative expenses | 70,532,891 | 61,450,284 | 140,009,379 | 105,478,097 |
Depreciation and amortization | 7,598,376 | 5,251,020 | 15,127,709 | 9,124,157 |
Income from operations | 7,046,310 | 2,839,993 | 10,867,304 | 8,190,759 |
Interest income | 0 | 23,909 | 0 | 23,909 |
Interest expense | (3,524,166) | (4,350,256) | (7,027,561) | (4,388,224) |
Other expense | 0 | (74,274) | 0 | (126,295) |
Interest and other expense | (3,524,166) | (4,400,621) | (7,027,561) | (4,490,610) |
Income (Loss) before provision for income taxes | 3,522,144 | (1,560,628) | 3,839,743 | 3,700,149 |
Income tax (expense) benefit | (1,591,375) | 879,000 | (1,646,363) | (1,054,000) |
Net income (loss) | $ 1,930,769 | $ (681,628) | $ 2,193,380 | $ 2,646,149 |
Earnings (Loss) per common share: | ||||
Basic (in usd per share) | $ 0.07 | $ (0.03) | $ 0.08 | $ 0.10 |
Diluted (in usd per share) | $ 0.07 | $ (0.03) | $ 0.07 | $ 0.10 |
Consolidated Balance Sheets (Parentheticals) - USD ($) |
Jun. 30, 2016 |
Dec. 31, 2015 |
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Current assets: | ||
Allowance for doubtful accounts | $ 1,536,287 | $ 1,627,315 |
Customer relationships and other intangible assets, accumulated amortization | $ 34,759,406 | $ 26,785,810 |
Stockholders' equity: | ||
Common stock, par value (in usd per share) | $ 0.0001 | $ 0.0001 |
Common stock, shares authorized | 100,000,000 | 100,000,000 |
Common stock, shares issued | 30,218,653 | 29,765,525 |
Common stock, shares outstanding | 28,651,997 | 29,727,588 |
Treasury stock, shares | 1,566,656 | 37,937 |
Summary of Significant Accounting Policies |
6 Months Ended |
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Jun. 30, 2016 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | Summary of Significant Accounting Policies Basis of Presentation The consolidated financial statements include the accounts of Echo Global Logistics, Inc. and its subsidiaries (the "Company" or "Echo"). All significant intercompany accounts and transactions have been eliminated in the consolidation. The consolidated statements of operations include the results of entities or assets acquired from the effective date of the acquisition for accounting purposes. The preparation of the consolidated financial statements is in conformity with the rules and regulations of the Securities and Exchange Commission ("SEC") and accounting principles generally accepted in the United States ("U.S. GAAP") for interim financial information. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules or regulations. In the opinion of management, the accompanying unaudited financial statements reflect all adjustments considered necessary for a fair presentation of the results for the period and those adjustments are of a normal recurring nature. The operating results for the six months ended June 30, 2016 are not necessarily indicative of the results expected for the full year 2016. These interim consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's audited financial statements for the year ended December 31, 2015. Preparation of Financial Statements and Use of Estimates The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Actual results can differ from those estimates. Fair Value of Financial Instruments The carrying values of the Company's financial instruments, which consist of cash and cash equivalents, accounts receivable and accounts payable, approximate their fair values due to their short-term nature. The fair value of the due to seller liabilities are determined based on the likelihood of the Company making contingent earn-out payments. The fair value of the contingent asset related to the Command Transportation, LLC ("Command") acquisition is determined based on the likelihood of the Company receiving contingent payments (see Footnote 3). The fair value of the liability component of the Notes (as defined in Footnote 11) was determined using the discounted cash flow analysis discussed in Footnote 11. |
Recent Accounting Pronouncements |
6 Months Ended |
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Jun. 30, 2016 | |
New Accounting Pronouncements and Changes in Accounting Principles [Abstract] | |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In March 2016, the Financial Accounting Standards Board ("FASB") issued ASU 2016-09, Compensation – Stock Compensation: Improvements to Employee Share-Based Payment Accounting. The guidance requires the recognition of the income tax effects of share-based payment awards in the income statement when the awards vest or are settled, thus eliminating additional paid-in capital pools. The guidance also allows for the employer to repurchase more of an employee’s shares for tax withholding purposes without triggering liability accounting. In addition, the guidance allows for a policy election to account for forfeitures as they occur rather than on an estimated basis. This new accounting standard will be effective beginning January 1, 2017. The Company is evaluating the effects that the adoption of this guidance will have on the Company’s financial statements. In February 2016, the FASB issued ASU 2016-02, Leases. This guidance requires a lessee to record on the balance sheet the assets and liabilities for the rights and obligations created by leases with lease terms of more than 12 months. This new accounting standard will be effective beginning January 1, 2019. The Company is evaluating the effects that the adoption of this guidance will have on the Company’s financial statements. In February 2015, the FASB issued ASU 2015-02, Amendments to the Consolidation Analysis, which amends the guidance regarding the consolidation analysis performed by reporting entities that are involved with VIEs, particularly those that have decision maker or service provider fee arrangements and related-party relationships. This new accounting standard is effective as of January 1, 2016, and the adoption did not have a material impact on the Company’s financial statements. In August 2014, the FASB issued ASU 2014-15, Disclosure of Uncertainties About an Entity’s Ability to Continue as a Going Concern, which requires management to perform interim and annual assessments of an entity’s ability to continue as a going concern within one year of the date of issuance of the entity’s financial statements. The accounting standard is effective for annual periods ending after December 15, 2016 and interim periods within annual periods beginning after December 15, 2016. Early adoption is permitted. The adoption of this standard is not expected to have a material impact on the Company’s financial statements. In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, to clarify the principles used to recognize revenue for all entities. The guidance is effective for annual and interim periods beginning after December 15, 2017. Two methods of adoption are permitted - a full retrospective method that applies the new standard to each prior reporting period presented, or a modified retrospective approach that recognizes the cumulative effect of applying the new standard at the date of initial application. Early adoption is not permitted. The Company is evaluating the effects that the adoption of this guidance will have on the Company’s financial statements. |
Acquisitions |
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Business Combinations [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Acquisitions | Acquisitions Command Transportation, LLC On June 1, 2015, the Company completed the acquisition of all of the outstanding membership units of Command, one of the largest privately held truckload brokers and non-asset based transportation providers in the United States. Command is headquartered in Skokie, Illinois, with satellite locations in Texas, Missouri and Kansas. The Company financed the cash purchase price for the Command acquisition, in part, with the proceeds from the issuance of shares of its common stock and Notes. The Company financed the remainder of the cash purchase price for the Command acquisition with drawings under the ABL Facility (as defined in Footnote 11). Additionally, a portion of the purchase price consisted of shares of Echo common stock issued to one of the sellers. The purchase price is reduced by a contingent consideration asset related to the retention of former Command employees. The acquisition date fair value of the total consideration transferred was $407.7 million:
The equity portion of the purchase price consisted of 503,829 unregistered shares of Echo common stock issued to Paul Loeb, the former owner of Command, on June 1, 2015. The closing price of Echo common stock on June 1, 2015 was $32.52 per share. As these shares were unregistered, the Company applied a 10% marketability discount to determine the fair value of the consideration transferred. The following table summarizes the allocation of the total consideration transferred for the acquisition of Command:
Goodwill of $225,304,568, which is approximately the amount of goodwill deductible for U.S. income tax purposes, represents the premium the Company paid over the fair value of the net tangible and identifiable intangible assets it acquired. The Company paid this premium because the acquisition of Command will, among other things, significantly enhance the Company's national scale and density in the highly fragmented truckload market. In addition, Echo paid this premium to acquire an experienced sales force with established customer and carrier relationships and Command executives with significant experience in the transportation industry. During the first quarter of 2016, the Company adjusted the purchase price to recognize a $1.2 million contingent asset that may be due from the seller related to the retention of former Command employees. The fair value of the contingent asset at the acquisition date was determined based on the probability of the Company meeting certain employee retention criteria set forth in the purchase agreement. The Company recorded the current and noncurrent portions of the contingent asset to other current assets and other noncurrent assets, respectively, on the balance sheet. The Company will determine the fair value of the contingent asset each quarter based on the likelihood of meeting the employee retention criteria, and will record any change in fair value to selling, general and administrative expense in the consolidated statement of operations. The maximum amount the Company could have received under this agreement was $1.5 million. During the second quarter of 2016, the Company received $750,000 from the seller of Command after the Company met certain employee retention criteria set forth in the purchase agreement. The Company also recorded expense of $32,006 to selling, general and administrative expense in the consolidated statement of operations to reflect the contingent asset's updated fair value of $0.4 million as of June 30, 2016. The fair values assigned to the intangible assets acquired were as follows:
The customer relationships are being amortized using an accelerated method, as an accelerated method best approximates the distribution of cash flows generated by the acquired customer relationships. The carrier relationships, trade names and noncompete agreements are being amortized using the straight-line method. On June 1, 2015, the Company issued 335,882 shares of restricted common stock to 33 Command employees as employment inducement awards pursuant to NASDAQ Listing Rule 5635(c)(4). This restricted common stock vested on June 1, 2016 and was recognized as compensation expense over the vesting period. Additionally, at the closing, the Company issued 100,766 and 67,178 shares of restricted common stock and performance stock, respectively, to two of the sellers who entered into new employment agreements with the Company as employment inducement awards pursuant to NASDAQ Listing Rule 5635(c)(4). This restricted common stock and performance stock vests over 3 years and will be recognized as compensation expense over the vesting period. As of June 30, 2016, 33,588 and 33,589 shares of restricted common stock and performance stock, respectively, were outstanding. The stock compensation expense related to these issuances for the three and six months ended June 30, 2016 was $2.1 million and $5.2 million, respectively. From the acquisition date through June 30, 2015, the stock compensation related to these issuances was $1.0 million. |
Fair Value Measurement |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Measurement | Fair Value Measurement The Company applies ASC Topic 820, Fair Value Measurements and Disclosures, for its financial assets and financial liabilities. The guidance requires disclosures about assets and liabilities measured at fair value. The Company's financial liabilities primarily relate to contingent earn-out payments due to seller in connection with various acquisitions. The fair value of the due to seller liabilities at June 30, 2016 was $1.8 million. The potential earn-out payments and performance periods are defined in the individual purchase agreements for each acquisition. Earnings before interest, taxes, depreciation and amortization ("EBITDA") is the performance target defined and measured to determine the earnout payment due, if any, after each defined measurement period. The Company's financial assets relate to contingent payments that may be due from the seller of Command if certain employee retention criteria are met. The fair value of the due from seller contingent asset at June 30, 2016 was $0.4 million. The fair value of the due from seller contingent asset is determined based on the likelihood of the employee retention criteria being met. ASC Topic 820 includes a fair value hierarchy that is intended to increase consistency and comparability in fair value measurements and related disclosures. The fair value hierarchy is based on observable or unobservable inputs to valuation techniques that are used to measure fair value. Observable inputs reflect assumptions market participants would use in pricing an asset or liability based on market data obtained from independent sources while unobservable inputs reflect a reporting entity's pricing based upon its own market assumptions. The fair value hierarchy consists of the following three levels:
The significant inputs used to derive the fair value of the amounts due to seller include financial forecasts of future operating results, the probability of reaching the forecast and an appropriate discount rate for each contingent liability. Probabilities are estimated by reviewing financial forecasts and assessing the likelihood of reaching the required performance measures based on factors specific to each acquisition as well as the Company’s historical experience with similar arrangements. If an acquisition reaches the required performance measure, the estimated probability would be increased to 100% and would still be classified as a contingent liability on the balance sheet. If the measure is not reached, the probability would be reduced to reflect the amount earned, if any, depending on the terms of the agreement. Discount rates used in determining the fair value of the contingent consideration due to seller ranged between 5% and 6%. Historical results of the respective acquisitions serve as the basis for the financial forecasts used in the valuation. Quantitative factors are also considered in these forecasts, including acquisition synergies, growth and sales potential, and potential operational efficiencies gained. Changes to the significant inputs used in determining the fair value of the contingent consideration due to seller could result in a change in the fair value of the contingent consideration. However, the correlation and inverse relationship between higher projected financial results to the discount rate applied and probability of meeting the financial targets mitigates the effect of any changes to the unobservable inputs. The following tables set forth the Company's financial assets and liabilities measured at fair value on a recurring basis and the basis of measurement at June 30, 2016 and December 31, 2015:
The following table provides a reconciliation of the beginning and ending balances for the liabilities measured at fair value using significant unobservable inputs (Level 3):
The following table provides a reconciliation of the beginning and ending balances for the assets measured at fair value using significant unobservable inputs (Level 3):
For the six months ended June 30, 2016 and 2015, the Company recognized a benefit of $120,948 and an expense of $164,755, respectively, in selling, general and administrative expense due to the change in fair value determined by a level three valuation technique. These changes in fair value resulted from using revised forecasts that took into account the most recent performance at each acquired business, the effect of the time value of money and the likelihood of the employee retention criteria being met. During the six months ended June 30, 2016 and 2015, the Company made contingent earn-out payments of $2,086,243 and $2,945,833, respectively, to the sellers of businesses acquired by the Company. During the six months ended June 30, 2016, the Company received $750,000 of contingent payments from the seller of Command. The Company did not receive any contingent payments from the seller of Command in 2015. |
Intangibles and Goodwill |
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Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Intangibles and Goodwill | Intangibles and Goodwill The following is a roll-forward of goodwill from December 31, 2015 to June 30, 2016:
The following is a summary of amortizable intangible assets as of June 30, 2016 and December 31, 2015:
The customer relationships are being amortized using an accelerated method, as an accelerated method best approximates the distribution of cash flows generated by the acquired customer relationships. The carrier relationships, trade names and noncompete agreements are being amortized using the straight-line method. Amortization expense related to intangible assets was $7,973,596 and $3,432,317 for the six months ended June 30, 2016 and 2015, respectively. The estimated amortization expense for the next five years and thereafter is as follows:
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Accrued Expenses and Other Noncurrent Liabilities |
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Payables and Accruals [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accrued Expenses and Other Noncurrent Liabilities | Accrued Expenses and Other Noncurrent Liabilities The components of accrued expenses at June 30, 2016 and December 31, 2015 were as follows:
The other noncurrent liabilities of $8,294,032 and $2,940,435 as of June 30, 2016 and December 31, 2015, respectively, consist of the portion of deferred rent in excess of twelve months and the long-term uncertain tax liability. |
Income Taxes |
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Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Taxes | Income Taxes The following table shows the Company's effective income tax rate for the three and six months ended June 30, 2016 and 2015:
The difference in the Company's effective tax rate for the six months ended June 30, 2016 from the Company's statutory federal tax rate of 35% was primarily due to the completion of several federal and state tax audits. The decrease in the Company's effective tax rate for the three months ended June 30, 2016 compared to the three months ended June 30, 2015 was primarily due to the effect of the second quarter 2015 pre-tax loss. |
Earnings (Loss) Per Share |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings (Loss) Per Share | Earnings (Loss) Per Share Basic earnings (loss) per common share is calculated by dividing net income (loss) by the weighted average number of common shares outstanding. Diluted earnings (loss) per common share is calculated by dividing net income (loss) by the weighted average shares outstanding plus share equivalents that would arise from the exercise of share options and the vesting of restricted stock. The computation of basic and diluted earnings (loss) per common share for the three and six months ended June 30, 2016 and 2015 is as follows:
There were no employee stock options and no unvested restricted stock excluded from the calculation of diluted earnings (loss) per common share for the three and six months ended June 30, 2016 and six months ended June 30, 2015. For the three months ended June 30, 2015, 601,860 incremental shares related to stock-based awards were not included in the computation of diluted earnings (loss) per common share because of the net loss during the period. As of June 30, 2016, none of the conditions allowing holders of the Notes to convert have been met and no conversion spread exists. As such, the Notes did not have a dilutive impact on diluted earnings per common share for the three and six months ended June 30, 2016. |
Stock-Based Compensation Plans |
6 Months Ended |
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Jun. 30, 2016 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Stock-Based Compensation Plans | Stock-Based Compensation Plans The Company recorded $3,793,083 and $9,109,921 in total stock-based compensation expense with corresponding income tax benefits of $1,436,820 and $3,450,838 for the three and six months ended June 30, 2016, respectively. For the three and six months ended June 30, 2015, the Company recorded $2,613,768 and $4,504,835 in total stock-based compensation expense with corresponding income tax benefits of $979,640 and $1,673,662, respectively. During the six months ended June 30, 2016 and 2015, the Company did not grant any stock options. The Company granted 236,375 and 674,947 shares of restricted stock to various employees during the six months ended June 30, 2016 and 2015, respectively. In 2014, the Company initiated a performance and market-based stock incentive plan for certain executives that provides vesting based on specific financial and market-based performance measurements. The Company granted 91,612 and 69,213 shares of performance and market-based stock during the six months ended June 30, 2016 and 2015, respectively. |
Contingencies |
6 Months Ended |
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Jun. 30, 2016 | |
Commitments and Contingencies Disclosure [Abstract] | |
Contingencies | Contingencies In the normal course of business, the Company is subject to potential claims and disputes related to its business, including claims for freight lost or damaged in transit. Some of these matters may be covered by the Company's insurance and risk management programs or may result in claims or adjustments with the Company's carriers. In July 2016, the Company received an unfavorable appeals assessment regarding a state activity-based tax matter of $1,291,941, including penalties and interest, for the state tax audit period from January 1, 2010 to June 30, 2014. The Company believes the assessment is without merit and intends to defend the Company's position through additional courses of action still available to the Company. The Company has not recorded any potential loss related to this matter as of June 30, 2016. There have been no updates to previously disclosed legal matters during the six months ended June 30, 2016. Management does not believe that the outcome of any of the legal proceedings to which the Company is a party will have a material adverse effect on its financial position or results of operations. |
Long-Term Debt |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Long-Term Debt | Long-Term Debt ABL Facility On June 1, 2015, the Company and Command, as co-borrowers, entered into a Revolving Credit and Security Agreement (the “Credit Agreement”) with PNC Bank. The Credit Agreement provides for a senior secured revolving credit facility in an initial aggregate principal amount of up to $200 million (the “ABL Facility”). The Company's obligations under the ABL facility are secured, on a first lien priority basis, by certain working capital assets.The initial aggregate principal amount under the ABL Facility may be increased from time to time by an additional $100 million to a maximum aggregate principal amount of $300 million. Interest is payable at a rate per annum equal to, at the option of the Company, any of the following, plus, in each case, an applicable margin: (a) a base rate determined by reference to the highest of (1) the federal funds effective rate, plus 0.50%, (2) the base commercial lending rate of PNC Bank, National Association and (3) a daily LIBOR rate, plus 1.00%; or (b) a LIBOR rate determined by reference to the costs of funds for deposits in the relevant currency for the interest period relevant to such borrowing adjusted for certain additional costs. The applicable margin is 0.25% to 0.75% for borrowings at the base rate and 1.25% to 1.75% for borrowings at the LIBOR rate, in each case, based on the excess availability under the ABL Facility. The Company is also required to pay a commitment fee in respect to the unutilized commitments under the revolving credit facility of between 0.25% and 0.375% based on the excess availability for the prior calendar quarter under the ABL Facility. At June 30, 2016, the Company's commitment fee was calculated at a rate of 0.375%. The Company recognized interest expense related to the commitment fee and borrowings on the ABL Facility of $0.4 million for the six months ended June 30, 2016. The Company drew $5.0 million on the ABL Facility during the second quarter of 2016, all of which was repaid as of June 30, 2016. No amounts were outstanding on the ABL Facility as of June 30, 2016. The issuance of letters of credit under the ABL Facility reduces available borrowings. At June 30, 2016, there were $0.7 million of letters of credit outstanding. The total draw allowed on the ABL Facility at June 30, 2016, as determined by the working capital assets pledged as collateral, was $182.5 million. After adjusting for the letters of credit, the Company's remaining availability under the ABL Facility at June 30, 2016 was $181.8 million. The Company incurred issuance costs of $3.1 million in 2015 related to the ABL Facility. These issuance costs are being amortized to interest expense using straight-line amortization over the 5 year life of the ABL Facility. For the six months ended June 30, 2016, the Company recorded $0.4 million of interest expense related to ABL Facility issuance costs. As there is no outstanding draw on the ABL Facility at June 30, 2016, the unamortized issuance costs are presented as a deferred asset on the balance sheet. Convertible Senior Notes On May 5, 2015, the Company issued $230 million aggregate principal amount of 2.50% convertible senior notes due 2020 (the “Notes”). The Notes bear interest at a rate of 2.50% per year payable semiannually in arrears in cash on May 1 and November 1 of each year, beginning on November 1, 2015. The Notes will mature on May 1, 2020, unless earlier converted or repurchased in accordance with the terms discussed below. The Notes are the Company's senior unsecured obligations and rank senior in right of payment to any of the Company's indebtedness that is expressly subordinated in right of payment to the Notes; equal in right of payment to any of the Company's unsecured indebtedness that is not so subordinated; effectively junior in right of payment to any of the Company's secured indebtedness to the extent of the value of the assets securing such indebtedness; and structurally junior to all indebtedness and other liabilities (including trade payables) of the Company's subsidiaries. The Notes will be convertible, under certain circumstances and during certain periods, into cash, shares of the Company's common stock, or a combination of cash and shares of common stock at the Company's election, at an initial conversion rate of 25.5428 shares of common stock per $1,000 principal amount of Notes, which is equivalent to an initial conversion price of approximately $39.15 per share of common stock. The Company's intent and policy will be to settle the $230 million principal amount of Notes in cash, and any excess conversion premium in shares of common stock. As such, the principal amount of the Notes will not be included in the calculation of diluted earnings per common share, but any conversion premium that exists will be included in the calculation of diluted earnings per common share using the treasury stock method. As of June 30, 2016, none of the conditions allowing holders of the Notes to convert have been met and no conversion spread exists. As such, the notes did not have a dilutive impact on diluted earnings per common share for the six months ended June 30, 2016. The accounting guidance in ASC 470-20, Debt with Conversion and Other Options, requires that the principal amount of the Notes be separated into liability and equity components at issuance. The value assigned to the liability component is the estimated fair value, as of the issuance date, of a similar debt instrument without the conversion feature. The difference between the principal amount of the Notes and the estimated fair value of the liability component, representing the value of the conversion premium assigned to the equity component, is recorded as a debt discount on the issuance date. The fair value of the liability component of the Notes was determined using a discounted cash flow analysis, in which the projected interest and principal payments were discounted back to the issuance date of the Notes at an estimated market yield for a similar debt instrument without the conversion feature. The Company estimated the straight debt yield using a combination of inputs observable in the marketplace, including the credit spread indicated by the terms of the Company's ABL Facility, LIBOR rates, and U.S. Treasury bonds. This represents a Level 2 valuation technique. The Company estimated the straight debt borrowing rates at issuance to be 5.75% for similar debt to the Notes without the conversion feature, which resulted in a fair value of the liability component of $198.5 million and a fair value of the equity component of $31.5 million. The fair value of the equity component was recorded as a debt discount, with the offset recorded as a credit to additional paid-in capital within stockholders' equity. The $31.5 million debt discount and Note issuance costs discussed below are being amortized to interest expense under the effective interest method over the 5 year life of the Notes, using an effective interest rate of 6.33%. The Company allocated the total issuance costs related to the Notes to the liability and equity components based on their relative fair values. Issuance costs attributable to the liability component were recorded on the consolidated balance sheets as a contra-liability that reduces the carrying amount of the convertible note liability. This amount is being amortized to interest expense over the term of the Notes using the effective interest method and an effective interest rate of 6.33%. Issuance costs attributable to the equity component were recorded as a charge to additional paid-in capital within stockholders' equity. As of June 30, 2016, the carrying amount of the Notes on the balance sheet was $200.1 million, calculated as follows:
The Notes are carried on the balance sheet at their principal amount, net of the unamortized debt discount and unamortized debt issuance costs, and are not marked to market each period. The approximate fair value of the Notes as of June 30, 2016 was $218.8 million. The fair value of the Notes was estimated based on the trading price of the Notes at June 30, 2016. As trading volume is low, these are quoted prices for identical instruments in markets that are not active, and thus are Level 2 in the fair value hierarchy. The Company recognized interest expense related to the Notes of $6.3 million for the six months ended June 30, 2016, consisting of $2.9 million of contractual coupon interest, $2.8 million of debt discount amortization and $0.6 million of debt issuance cost amortization. The Company recognized interest expense related to the Notes of $2.1 million from the issuance date through June 30, 2015, consisting of $1.0 million of contractual coupon interest, $0.9 million of debt discount amortization and $0.2 million of debt issuance cost amortization. The undiscounted interest and principal payments due in relation to the Notes from June 30, 2016 to the maturity of the Notes on May 1, 2020 are as follows:
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Related Parties |
6 Months Ended |
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Jun. 30, 2016 | |
Related Party Transactions [Abstract] | |
Related Parties | Related Parties As of the closing of the Command acquisition on June 1, 2015, the Company leases the Command office building headquarters in Skokie, Illinois from a company owned by Paul Loeb, the former owner of Command who joined the Echo Board of Directors in June 2015. The lease requires monthly rental payments of $54,638 for the duration of the lease, which ends on December 31, 2018. The Company is obligated to pay real estate taxes, insurance and all building maintenance costs in addition to the minimum rental payments for the facility related to this lease. The total rental expense related to this lease included in the Company's consolidated statements of operations for the six months ended June 30, 2016 was $327,828. All amounts due under the lease were paid as of June 30, 2016, and thus there was no liability due to the related party at June 30, 2016. |
Summary of Significant Accounting Policies (Policies) |
6 Months Ended |
---|---|
Jun. 30, 2016 | |
Accounting Policies [Abstract] | |
Preparation of Financial Statements and Use of Estimates | Preparation of Financial Statements and Use of Estimates The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Actual results can differ from those estimates. |
Fair Value of Financial Instruments | Fair Value of Financial Instruments The carrying values of the Company's financial instruments, which consist of cash and cash equivalents, accounts receivable and accounts payable, approximate their fair values due to their short-term nature. The fair value of the due to seller liabilities are determined based on the likelihood of the Company making contingent earn-out payments. The fair value of the contingent asset related to the Command Transportation, LLC ("Command") acquisition is determined based on the likelihood of the Company receiving contingent payments (see Footnote 3). The fair value of the liability component of the Notes (as defined in Footnote 11) was determined using the discounted cash flow analysis discussed in Footnote 11. |
Acquisitions (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Business Combinations [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair value of total consideration transferred for Command |
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Allocation of the total consideration transferred for Command | The following table summarizes the allocation of the total consideration transferred for the acquisition of Command:
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Fair values assigned to intangible assets acquired for Command | The fair values assigned to the intangible assets acquired were as follows:
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Fair Value Measurement (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Financial assets and liabilities measured at fair value on a recurring basis | The following tables set forth the Company's financial assets and liabilities measured at fair value on a recurring basis and the basis of measurement at June 30, 2016 and December 31, 2015:
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Reconciliation of the beginning and ending balances for the liabilities measured at fair value using significant unobservable inputs | The following table provides a reconciliation of the beginning and ending balances for the liabilities measured at fair value using significant unobservable inputs (Level 3):
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Reconciliation of the beginning and ending balances for the assets measured at fair value using significant unobservable inputs | The following table provides a reconciliation of the beginning and ending balances for the assets measured at fair value using significant unobservable inputs (Level 3):
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Intangibles and Goodwill (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Roll-forward of goodwill | The following is a roll-forward of goodwill from December 31, 2015 to June 30, 2016:
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Summary of amortizable intangible assets | The following is a summary of amortizable intangible assets as of June 30, 2016 and December 31, 2015:
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Estimated amortization expense for the next five years and thereafter | The estimated amortization expense for the next five years and thereafter is as follows:
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Accrued Expenses and Other Noncurrent Liabilities (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Payables and Accruals [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Components of accrued expenses | The components of accrued expenses at June 30, 2016 and December 31, 2015 were as follows:
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Income Taxes (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Reconciliation of effective income tax rate | The following table shows the Company's effective income tax rate for the three and six months ended June 30, 2016 and 2015:
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Earnings (Loss) Per Share (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Computation of basic and diluted earnings (loss) per common share | The computation of basic and diluted earnings (loss) per common share for the three and six months ended June 30, 2016 and 2015 is as follows:
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Long-Term Debt (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of convertible senior notes | As of June 30, 2016, the carrying amount of the Notes on the balance sheet was $200.1 million, calculated as follows:
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Schedule of maturities of convertible senior notes | The undiscounted interest and principal payments due in relation to the Notes from June 30, 2016 to the maturity of the Notes on May 1, 2020 are as follows:
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Acquisitions - Consideration Transferred (Details) - USD ($) |
3 Months Ended | 6 Months Ended | |||
---|---|---|---|---|---|
Jun. 01, 2015 |
Jun. 30, 2016 |
Mar. 31, 2016 |
Jun. 30, 2016 |
Jun. 30, 2015 |
|
Business Acquisition [Line Items] | |||||
Contingent consideration, fair value | $ 32,006 | $ (32,006) | $ 0 | ||
Working capital adjustment | $ 1,176,417 | ||||
Command Transportation, LLC | |||||
Business Acquisition [Line Items] | |||||
Cash | $ 394,279,778 | ||||
Echo common stock, fair value | 14,746,000 | ||||
Contingent consideration, fair value | (1,176,417) | $ (1,200,000) | |||
Working capital adjustment | (142,969) | ||||
Total consideration transferred | $ 407,706,392 |
Acquisitions - Purchase Price Allocation (Details) - USD ($) |
Jun. 30, 2016 |
Dec. 31, 2015 |
Jun. 01, 2015 |
---|---|---|---|
Business Acquisition [Line Items] | |||
Goodwill | $ 307,314,171 | $ 308,490,588 | |
Command Transportation, LLC | |||
Business Acquisition [Line Items] | |||
Cash | $ 9,495,246 | ||
Accounts receivable, net | 62,398,350 | ||
Property and equipment | 3,667,615 | ||
Prepaid expenses | 818,903 | ||
Goodwill | 225,304,568 | ||
Intangible assets | 125,400,000 | ||
Total assets acquired | 427,084,682 | ||
Accounts payable | 11,172,240 | ||
Accrued expenses | 8,206,050 | ||
Total liabilities assumed | 19,378,290 | ||
Total consideration transferred | $ 407,706,392 |
Acquisitions - Intangible Assets Acquired (Details) - Command Transportation, LLC |
Jun. 01, 2015
USD ($)
|
---|---|
Business Acquisition [Line Items] | |
Value | $ 125,400,000 |
Customer relationships | |
Business Acquisition [Line Items] | |
Value | $ 97,200,000 |
Useful Life | 17 years |
Carrier relationships | |
Business Acquisition [Line Items] | |
Value | $ 18,300,000 |
Useful Life | 17 years |
Trade names | |
Business Acquisition [Line Items] | |
Value | $ 5,000,000 |
Useful Life | 4 years |
Noncompete agreements | |
Business Acquisition [Line Items] | |
Value | $ 4,900,000 |
Noncompete agreements | Minimum | |
Business Acquisition [Line Items] | |
Useful Life | 5 years |
Noncompete agreements | Maximum | |
Business Acquisition [Line Items] | |
Useful Life | 8 years |
Fair Value Measurement - Reconciliation of Liabilities Using Level 3 (Details) - Level 3 - USD ($) |
6 Months Ended | |
---|---|---|
Jun. 30, 2016 |
Jun. 30, 2015 |
|
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items] | ||
Balance at beginning of period | $ (4,086,697) | |
Change in contingent consideration due to seller | 152,954 | |
Payment of contingent consideration due to seller | 2,086,243 | $ 2,945,833 |
Balance at end of period | $ (1,847,500) |
Fair Value Measurement - Reconciliation of Assets Using Level 3 (Details) - Level 3 |
6 Months Ended |
---|---|
Jun. 30, 2016
USD ($)
| |
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items] | |
Balance at beginning of period | $ 0 |
Command purchase price adjustment | 1,176,417 |
Receipt of contingent consideration due from seller | (750,000) |
Change in contingent consideration due from seller | (32,006) |
Balance at end of period | $ 394,411 |
Intangibles and Goodwill - Goodwill (Details) |
6 Months Ended |
---|---|
Jun. 30, 2016
USD ($)
| |
Goodwill roll-forward: | |
Balance at beginning of period | $ 308,490,588 |
Command acquisition, purchase price adjustment | (1,176,417) |
Balance at end of period | $ 307,314,171 |
Accrued Expenses and Other Noncurrent Liabilities (Details) - USD ($) |
Jun. 30, 2016 |
Dec. 31, 2015 |
---|---|---|
Payables and Accruals [Abstract] | ||
Accrued compensation | $ 17,047,829 | $ 17,937,504 |
Accrued rebates | 2,585,455 | 2,535,606 |
Accrued employee benefits | 2,822,762 | 2,809,239 |
Accrued professional service fees | 1,227,715 | 1,837,749 |
Accrued interest | 1,152,230 | 1,463,880 |
Deferred rent | 1,202,567 | 400,809 |
Other | 4,569,126 | 3,298,275 |
Total accrued expenses | 30,607,684 | 30,283,062 |
Other noncurrent liabilities | $ 8,294,032 | $ 2,940,435 |
Income Taxes (Details) - USD ($) |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2016 |
Jun. 30, 2015 |
Jun. 30, 2016 |
Jun. 30, 2015 |
|
Income Tax Disclosure [Abstract] | ||||
Income (Loss) before provision for income taxes | $ 3,522,144 | $ (1,560,628) | $ 3,839,743 | $ 3,700,149 |
Income tax (expense) benefit | $ (1,591,375) | $ 879,000 | $ (1,646,363) | $ (1,054,000) |
Effective tax rate | 45.20% | 56.30% | 42.90% | 28.50% |
Federal tax rate | 35.00% |
Stock-Based Compensation Plans (Details) - USD ($) |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2016 |
Jun. 30, 2015 |
Jun. 30, 2016 |
Jun. 30, 2015 |
|
Stock based compensation plans: | ||||
Stock-based compensation expense | $ 3,793,083 | $ 2,613,768 | $ 9,109,921 | $ 4,504,835 |
Tax benefits from stock-based compensation expense | $ 1,436,820 | $ 979,640 | $ 3,450,838 | $ 1,673,662 |
Grants in period, options (in shares) | 0 | 0 | ||
Restricted stock | ||||
Stock based compensation plans: | ||||
Grants in period, other than options (in shares) | 236,375 | 674,947 | ||
Performance and market-based stock | ||||
Stock based compensation plans: | ||||
Grants in period, other than options (in shares) | 91,612 | 69,213 |
Contingencies (Details) |
Jun. 30, 2016
USD ($)
|
---|---|
State Tax Audit [Member] | |
Loss Contingencies [Line Items] | |
Amount of assessment including penalties and interest | $ 1,291,941 |
Long-Term Debt - Maturity Schedule (Details) - Senior convertible notes, including interest |
Jun. 30, 2016
USD ($)
|
---|---|
Debt Instrument [Line Items] | |
Total | $ 253,000,000 |
2016 | 2,875,000 |
2017 | 5,750,000 |
2018 | 5,750,000 |
2019 | 5,750,000 |
2020 | $ 232,875,000 |
Related Parties (Details) - Director - USD ($) |
6 Months Ended | |
---|---|---|
Jun. 01, 2015 |
Jun. 30, 2016 |
|
Related Party Transaction [Line Items] | ||
Minimum monthly rental payments | $ 54,638 | |
Rent expense | $ 327,828 | |
Liability due to related party | $ 0 |
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