Echo Global Logistics
Echo Global Logistics, Inc. (Form: 10-Q, Received: 05/01/2014 16:22:33)

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________________________________
FORM 10-Q
____________________________________________

x
Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 
 
 
For the quarterly period ended March 31, 2014
 
 
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
____________________________________________
 
ECHO GLOBAL LOGISTICS, INC.
(Exact Name of Registrant as Specified in its Charter)
____________________________________________
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)
____________________________________________

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

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

        Indicate by check mark whether the Registrant is an a large accelerated filer, an accelerated filer, or non-accelerated filer. See definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer:  o
 
Accelerated filer:  x
 
Non-accelerated filer:  o
 
Smaller reporting company  o
 
 
 
 
(Do not check if a 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:  o      No:  x

        As of April 30, 2014, the Registrant had 23,487,379 shares of Common Stock, par value $0.0001 per share, outstanding.



 
 
 
Page
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated Statement of Stockholders' Equity for the three months ended March 31, 2014 (Unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


2

Table of Contents

PART I. FINANCIAL INFORMATION


Item 1.    Consolidated Financial Statements


Echo Global Logistics, Inc. and Subsidiaries
Consolidated Statements of Income
(Unaudited)
 
Three Months Ended
March 31,
 
2014
 
2013
REVENUE
$
247,670,217

 
$
203,977,378

 
 
 
 
COSTS AND EXPENSES:
 
 
 
Transportation costs
205,460,091

 
165,526,099

Selling, general, and administrative expenses
35,272,320

 
31,007,144

Depreciation and amortization
2,956,104

 
2,595,311

INCOME FROM OPERATIONS
3,981,702

 
4,848,824

Interest expense

 
(717
)
Other expense
(54,927
)
 
(93,499
)
OTHER EXPENSE, NET
(54,927
)
 
(94,216
)
INCOME BEFORE PROVISION FOR INCOME TAXES
3,926,775

 
4,754,608

INCOME TAX EXPENSE
(1,496,816
)
 
(1,777,976
)
NET INCOME
$
2,429,959

 
$
2,976,632

Basic net income per share
$
0.11

 
$
0.13

Diluted net income per share
$
0.10

 
$
0.13

See accompanying notes.


3

Table of Contents

Echo Global Logistics, Inc. and Subsidiaries
Consolidated Balance Sheets
 
March 31,
2014
 
December 31,
2013
 
(Unaudited)
 
 
Assets
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
42,642,907

 
$
52,506,560

Accounts receivable, net of allowance for doubtful accounts of $1,873,798 and $1,792,012 at March 31, 2014 and December 31, 2013, respectively
135,286,860

 
109,662,529

Income taxes receivable
519,579

 
1,337,180

Prepaid expenses
2,117,596

 
2,510,791

Deferred income taxes
946,480

 
943,740

Other current assets
98,403

 
121,403

Total current assets
181,611,825

 
167,082,203

Property and equipment, net
18,115,946

 
15,536,831

Intangible assets:
 
 

Goodwill
58,116,653

 
51,650,060

Intangible assets, net of accumulated amortization of $11,821,383 and $11,120,733 at March 31, 2014 and December 31, 2013, respectively
17,096,596

 
10,647,246

Other assets
235,253

 
230,253

Total assets
$
275,176,273

 
$
245,146,593

Liabilities and stockholders' equity
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
90,822,015

 
$
65,322,807

Due to seller-short term
5,176,201

 
5,763,779

Accrued expenses
9,490,928

 
8,322,117

Total current liabilities
105,489,144

 
79,408,703

Due to seller-long term
1,833,723

 
1,386,653

Other noncurrent liabilities
1,572,692

 
1,573,780

Deferred income taxes
4,021,475

 
3,547,426

Total liabilities
112,917,034

 
85,916,562

Stockholders' equity:
 
 
 

Common stock, par value $0.0001 per share, 100,000,000 shares authorized, 23,005,318 and 22,900,471 shares issued and outstanding at March 31, 2014 and December 31, 2013, respectively
2,302

 
2,291

Additional paid-in capital
107,431,040

 
106,831,802

Retained earnings
54,825,897

 
52,395,938

Total stockholders' equity
162,259,239

 
159,230,031

Total liabilities and stockholders' equity
$
275,176,273

 
$
245,146,593

See accompanying notes.

4

Table of Contents

Echo Global Logistics, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
 
Three Months Ended
March 31,
 
2014
 
2013
Operating activities
 
 
 
Net income
$
2,429,959

 
$
2,976,632

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Deferred income taxes
471,309

 
374,700

Noncash stock compensation expense
1,308,313

 
1,071,938

Increase in contingent consideration due to seller
224,162

 
758,695

Depreciation and amortization
2,956,104

 
2,595,311

Change in assets, net of acquisitions:
 
 
 
Accounts receivable
(19,192,003
)
 
(7,280,834
)
Taxes receivable (payable)
817,601

 
(589,784
)
Prepaid expenses and other assets
417,142

 
648,288

Change in liabilities, net of acquisitions:
 
 
 
Accounts payable
20,505,739

 
6,841,258

Accrued expenses and other
253,591

 
(1,152,824
)
Net cash provided by operating activities
10,191,917

 
6,243,380

Investing activities
 
 
 
Purchases of property and equipment
(4,316,741
)
 
(2,205,498
)
Payments for acquisitions, net of cash acquired
(13,785,095
)
 
(1,958,236
)
Net cash used in investing activities
(18,101,836
)
 
(4,163,734
)
Financing activities
 
 
 
Principal payments on capital lease obligations

 
(7,764
)
Tax benefit of stock options exercised
126,222

 
315,657

Payment of contingent consideration
(1,244,670
)
 

Issuance of shares, net of issuance costs
17,428

 
648,140

Employee tax withholdings related to net share settlements of equity-based awards
(852,714
)
 
(734,535
)
Net cash (used in) provided by financing activities
(1,953,734
)
 
221,498

(Decrease) increase in cash and cash equivalents
(9,863,653
)
 
2,301,144

Cash and cash equivalents, beginning of period
52,506,560

 
41,780,984

Cash and cash equivalents, end of period
$
42,642,907

 
$
44,082,128

Supplemental disclosure of cash flow information
 
 
 
Cash paid during the period for interest
$

 
$
720

Cash paid during the period for income taxes
81,684

 
1,662,444

Non-cash financing activity
 
 
 
Due to seller
880,000

 

See accompanying notes.


5

Table of Contents

Echo Global Logistics, Inc. and Subsidiaries
Consolidated Statement of Stockholders' Equity
Three Months Ended March 31, 2014
(Unaudited)

 
Common Stock
 
Additional
Paid-In
Capital
 
 
 
 
 
Shares
 
Amount
 
 
Retained
Earnings
 
Total
Balance at December 31, 2013
22,900,471

 
$
2,291

 
$
106,831,802

 
$
52,395,938

 
$
159,230,031

Share compensation expense

 

 
1,308,313

 

 
1,308,313

Exercise of stock options
1,600

 

 
17,428

 

 
17,428

Common stock issued for vested restricted stock
146,964

 
15

 
(15
)
 

 

Common shares withheld and retired to satisfy employee tax withholding obligations upon vesting of restricted stock
(43,717
)
 
(4
)
 
(852,710
)
 

 
(852,714
)
Tax benefit from exercise of stock options

 

 
126,222

 

 
126,222

Net income

 

 

 
2,429,959

 
2,429,959

Balance at March 31, 2014
23,005,318

 
$
2,302

 
$
107,431,040

 
$
54,825,897

 
$
162,259,239


See accompanying notes.

6

Table of Contents

Echo Global Logistics, Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
Three Months Ended March 31, 2014 and 2013

1. Summary of Significant Accounting Policies

Basis of Presentation

The condensed consolidated financial statements include the accounts of Echo Global Logistics, Inc. and its subsidiaries (the "Company"). All significant intercompany accounts and transactions have been eliminated in the consolidation. The consolidated statements of income 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 three month period ended March 31, 2014 are not necessarily indicative of the results expected for the full year of 2014 . These interim consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's most recent audited financial statements.

Preparation of Financial Statements and Use of Estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States (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 investments, 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 due to seller is determined based on the likelihood of contingent earn-out payments.


2. New Accounting Pronouncements

In July 2013, the FASB issued authoritative guidance under Accounting Standard Update ("ASU") 2013-11, which provides guidance on the financial statement presentation of an unrecognized tax benefit when a net operating loss (“NOL”) carryforward, a similar tax loss, or a tax credit carryforward exists. ASU 2013-11 requires entities to present an unrecognized tax benefit as a reduction of a deferred tax asset for a NOL or tax credit carryforward whenever the NOL or tax credit carryforward would be available to reduce the additional taxable income or tax due if the tax position is disallowed. This accounting standard update requires entities to assess whether to net the unrecognized tax benefit with a deferred tax asset as of the reporting date. The provisions of this new guidance were effective as of the beginning of the Company's 2014 fiscal year and did not have a material impact on its financial statements.


7

Echo Global Logistics, Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
Three Months Ended March 31, 2014 and 2013

3. Acquisitions

2014 Acquisitions

Online Freight Services, Inc.

Effective January 1, 2014 , the Company acquired Online Freight Services, Inc. ("OFS"), a non-asset-based truckload transportation brokerage based in Mendota Heights, Minnesota, and the results of OFS have been included in the unaudited consolidated financial statements since that date. The Company agreed to purchase the assets and assume certain liabilities of OFS for $9,460,742 in cash payable at closing and an additional $1,500,000 in cash consideration that may become payable upon achievement of certain performance measures on or prior to December 31, 2017 . As a result of the preliminary purchase accounting for the acquisition, the Company recorded $4,286,440 of goodwill, of which $880,000 is related to contingent consideration, and $4,850,000 of intangible assets, primarily customer relationships and trade names. This allocation is subject to change as the Company finalizes purchase accounting. The amount of goodwill deductible for U.S. income tax purposes is approximately $3,406,440 , excluding future contingent consideration payments. For the three month period ended March 31, 2014 , the Company recorded an increase of $60,000 to the contingent consideration obligation to reflect the change in fair value, which was primarily the result of adjustments to the forecasted financial performance of OFS resulting in a liability due to seller of $940,000 at March 31, 2014 . Pro forma results of the acquisition were not presented as they are not material to the financial statements.

Comcar Logistics, LLC

Effective February 1, 2014 , the Company acquired Comcar Logistics, LLC ("Comcar"), a non-asset-based truckload brokerage with offices in Jacksonville, Florida and Denver, Colorado, and the results of Comcar have been included in the unaudited consolidated financial statements since that date. The Company agreed to purchase the assets and assume certain liabilities of Comcar for $4,900,930 in cash. There is no contingent consideration associated with the purchase of Comcar. As a result of the preliminary purchase accounting for the acquisition, the Company recorded $2,180,153 of goodwill, which is approximately the amount of goodwill deductible for U.S. income tax purposes, and $2,300,000 of intangible assets, primarily customer relationships. This allocation is subject to change as the Company finalizes purchase accounting. Pro forma results of the acquisition were not presented as they are not material to the financial statements.


4. 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 of $7,009,924 . The potential earnout payments and performance are defined in the individual purchase agreement 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.

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:

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.

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. The

8

Echo Global Logistics, Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
Three Months Ended March 31, 2014 and 2013

probability of paying the contingent consideration ranges from 15% to 60% , with discount rates used in determining the fair value of the contingent consideration ranging between 3% and 12% . 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 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 table sets forth the Company's financial liabilities measured at fair value on a recurring basis and the basis of measurement at March 31, 2014 and December 31, 2013 :

 
Fair Value Measurements as of March 31, 2014
 
Total
 
Level 1
 
Level 2
 
Level 3
Liabilities:
 
 
 
 
 
 
 
Contingent consideration obligation
$
(7,009,924
)
 
$

 
$

 
$
(7,009,924
)

 
Fair Value Measurements as of December 31, 2013
 
Total
 
Level 1
 
Level 2
 
Level 3
Liabilities:
 
 
 
 
 
 
 
Contingent consideration obligation
$
(7,150,432
)
 
$

 
$

 
$
(7,150,432
)


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):
 
Due to Seller
Balance at December 31, 2013
$
(7,150,432
)
Increase related to acquisition of OFS
(880,000
)
Change in fair value
(224,162
)
Payment of contingent consideration
1,244,670

Balance at March 31, 2014
$
(7,009,924
)

For the three month period ended March 31, 2014 , the Company recorded an adjustment to each of the ten remaining contingent consideration obligations related to its acquisitions. The adjustments were the result of the time value of money and using revised forecasts and updated fair value measurements that adjusted the Company's estimated earn-out payments related to the purchases of these businesses.

For the three month periods ended March 31, 2014 and 2013 , the Company recognized charges of $224,162 and $758,695 , respectively, in selling, general, and administrative expenses in the consolidated statement of income due to the change in fair value measurements using a level three valuation technique.

For the three month period ended March 31, 2014 , the Company paid $1,244,670 in contingent earn-out payments. The Company paid the former owners of Nationwide Traffic Services LLC, Distribution Services Inc, and Sharp Freight Systems, $437,500 , $520,000 , and $287,170 , respectively, as the EBITDA targets set forth in the purchase agreements were met. For the three month period ended March 31, 2013 , the Company did not make any contingent earn-out payments.

9

Echo Global Logistics, Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
Three Months Ended March 31, 2014 and 2013


5. Intangibles and Other Assets

The following is a roll-forward of goodwill from December 31, 2013 to March 31, 2014 :

Balance as of December 31, 2013
$
51,650,060

  Goodwill acquired related to the purchase of OFS
4,286,440

  Goodwill acquired related to the purchase of Comcar
2,180,153

Balance as of March 31, 2014
$
58,116,653



The following is a summary of amortizable intangible assets as of March 31, 2014 and December 31, 2013 :

 
March 31, 2014
 
December 31, 2013
 
Weighted-
Average Life
Customer relationships
$
28,138,979

 
$
21,438,979

 
9.0 years
Noncompete agreements
139,000

 
139,000

 
2.9 years
Trade names
640,000

 
190,000

 
4.4 years
 
28,917,979

 
21,767,979

 
8.9 years
Less accumulated amortization
(11,821,383
)
 
(11,120,733
)
 
 
Intangible assets, net
$
17,096,596

 
$
10,647,246

 
 

Amortization expense related to intangible assets was $700,650 and $598,437 for the three months ended March 31, 2014 and 2013 , respectively.


The estimated amortization expense for the next five years and thereafter is as follows:

Remainder of 2014
$2,151,143
2015
2,623,685

2016
2,266,329

2017
1,987,904

2018
1,656,647

Thereafter
6,410,888

 
$
17,096,596


6. Accrued Expenses and Other Noncurrent Liabilities

The components of accrued expenses at March 31, 2014 and December 31, 2013 are as follows:
 
March 31, 2014
 
December 31, 2013
Accrued compensation
$
4,067,430

 
$
4,147,590

Accrued rebates
2,371,749

 
2,298,476

Deferred rent
276,515

 
263,893

Other
2,775,234

 
1,612,158

Total accrued expenses
$
9,490,928

 
$
8,322,117


The other noncurrent liability as of March 31, 2014 and December 31, 2013 is the portion of deferred rent in excess of twelve months.


10

Echo Global Logistics, Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
Three Months Ended March 31, 2014 and 2013

7. Income Taxe s     

The following table shows the Company's effective income tax rate for the three months ended March 31, 2014 and 2013 :
 
Three Months Ended
March 31,
 
2014
 
2013
Income before provision for income taxes
$
3,926,775

 
$
4,754,608

Income tax expense
(1,496,816
)
 
(1,777,976
)
Effective tax rate
38.1
%
 
37.4
%

The increase in the Company's effective tax rate was primarily due to the timing and reenactment of the research and development tax credit which occurred in early 2013 for both the 2012 and 2013 tax years.

8. Earnings Per Share

Basic earnings per common share is calculated by dividing net income available to common stockholders by the weighted average number of common shares outstanding. Diluted earnings per share is calculated by dividing net income by the number of weighted average common share equivalents outstanding. There were no employee stock options excluded from the calculation of diluted earnings per share for the three month periods ended March 31, 2014 and 2013 . The computation of basic and diluted earnings per common share for the three month periods ended March 31, 2014 and 2013 are as follows:
 
Three Months Ended
March 31,
 
2014
 
2013
Numerator:
 

 
 

Net income
$
2,429,959

 
$
2,976,632

Denominator:
 

 
 

Denominator for basic earnings per share-weighted-average shares
22,967,118

 
22,796,476

Effect of dilutive securities:
 

 
 

Employee stock awards
482,459

 
443,696

Denominator for dilutive earnings per share
23,449,577

 
23,240,172

Basic net income per common share
$
0.11

 
$
0.13

Diluted net income per common share
$
0.10

 
$
0.13


9. Stock-Based Compensation Plans

The Company recorded $1,308,313 and $1,071,938 in total stock-based compensation expense with corresponding tax benefits of $510,242 and $418,056 for the three month periods ended March 31, 2014 and 2013 , respectively. During the three month periods ended March 31, 2014 and March 31, 2013 , the Company did not grant any stock options. The Company granted 163,257 and 101,457 shares of restricted stock to various employees during the three month periods ended March 31, 2014 and 2013 , 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 43,437 shares of performance and market-based stock during the three month period ended March 31, 2014 . In 2013, the Company initiated a performance stock incentive plan for certain executives that provides vesting based on specific financial performance measurements. The Company granted 38,701 shares of performance stock during the three month period ended March 31, 2013 .





11

Echo Global Logistics, Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
Three Months Ended March 31, 2014 and 2013

10. Legal Matters

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.

Effective July 1, 2012, the Company acquired the assets of Shipper Direct, a truckload transportation brokerage located near Nashville, Tennessee. In August 2012, the Company discovered that the revenue and profitability of the acquired business, both prior and subsequent to the acquisition, were not as expected based on representations contained in the Asset Purchase Agreement. The Company believes the representations made in the Asset Purchase Agreement were fraudulent. The founders of Shipper Direct, who had become employees of the Company, were terminated as a result, and the Company requested that the sellers return the entire purchase price and that the contingent consideration provision of the Asset Purchase Agreement be voided. However, the Company received only $1,779,554 . On September 25, 2012, the sellers asserted indemnification claims against the Company under the indemnification provisions of the Asset Purchase Agreement for $2,400,000 , including a claim for the repayment of the $1,779,554 return of purchase price. The Company believes the sellers' indemnification claims are without merit and intends to vigorously defend against any legal action taken by the sellers with respect to their indemnification claims.

In November 2012, the founders filed a complaint with the U.S. Department of Labor alleging that their employment was wrongfully terminated in violation of the whistleblower provisions of Sarbanes-Oxley. On August 27, 2013, this action was terminated in the Company's favor when the founders voluntarily withdrew their complaint.

In January 2013, the Company filed a lawsuit in the U.S. District Court for the Northern District of Illinois against Shipper Direct, the founders and others alleging, among other things, breach of contract and fraud. The lawsuit is seeking monetary damages of $2,500,000 . On May 28, 2013, the Company obtained a default judgment against the founders, which the founders subsequently attempted to vacate. On April 28, 2014, the Company learned that the default judgment will stand. The monetary amount of the judgment will be determined after a hearing on May 14, 2014.

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.


12


Item 2.    Management's Discussion and Analysis of Financial Condition and Results of Operations

Certain statements in this Quarterly Report on Form 10-Q are "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). These statements involve a number of risks, uncertainties and other factors that could cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. Factors which could materially affect such forward-looking statements can be found in the section entitled "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2013 and elsewhere in this Quarterly Report. Investors are urged to consider these factors carefully in evaluating any forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements made herein are only made as of the date hereof and we undertake no obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances.

Overview

We are a leading provider of technology-enabled transportation and supply chain management solutions. We utilize a proprietary technology platform to compile and analyze data from our multi-modal network of transportation providers to satisfy the transportation and logistics needs of our clients. This model enables us to quickly adapt to and offer efficient and cost-effective solutions for our clients' shipping needs. We focus primarily on arranging transportation by truckload ("TL") and less than truckload ("LTL") carriers. We also offer intermodal (which involves moving a shipment by rail and truck), small parcel, domestic air, expedited and international transportation services. Our core logistics services include rate negotiation, shipment execution and tracking, carrier management, routing compliance and performance management reporting.
We procure transportation and provide logistics services for clients across a wide range of industries, such as manufacturing, construction, consumer products and retail. Our clients fall into two categories, Enterprise and Transactional. We typically enter into multi-year contracts with our Enterprise clients, which are often on an exclusive basis for a specific transportation mode or point of origin. As part of our value proposition, we also provide core logistics services to these clients. We provide transportation and logistics services to our Transactional clients on a shipment-by-shipment basis, typically with individual, or spot market, pricing.


13

Table of Contents

Results of Operations

The following table represents certain statement of operations data:
 
Three Months Ended
March 31,
 
2014
 
2013
 
(Unaudited)
 
 (in thousands, except per share data)
Consolidated statements of income data:
 
 
 
Revenue
$
247,670

 
$
203,977

Transportation costs
205,460

 
165,526

Net revenue
42,210

 
38,451

Operating expenses:
 
 
 
Commissions
11,208

 
9,943

Selling, general and administrative expenses
23,840

 
20,305

Contingent consideration expense
224

 
759

Depreciation and amortization
2,956

 
2,595

Total operating expenses
38,228

 
33,602

Income from operations
3,982

 
4,849

Other expense
(55
)
 
(94
)
Income before provision for income taxes
3,927

 
4,755

Income tax expense
(1,497
)
 
(1,778
)
Net income
$
2,430

 
$
2,977

Net income per share of common stock:
 
 
 
      Basic
$
0.11

 
$
0.13

      Diluted
$
0.10

 
$
0.13

Shares used in per share calculations:
 
 
 
      Basic
22,967

 
22,796

      Diluted
23,450

 
23,240




Revenue

We generate revenue through the sale of transportation and logistics services to our clients. Revenue is recognized when the client's product is delivered by a third-party carrier. Our revenue was $247.7 million and $204.0 million  for the three month periods ended March 31, 2014 and 2013 , respectively, representing a period-over-period increase of 21.4% .

Our revenue is generated from two different types of clients: Enterprise and Transactional. Our Enterprise accounts typically generate higher dollar amounts and volume than our Transactional relationships. We categorize a client as an Enterprise client if we have a contract with the client for the provision of services on a recurring basis. Our contracts with Enterprise clients typically have a multi-year term and are often on an exclusive basis for a specific transportation mode or point of origin. In several cases, we provide substantially all of a client's transportation and logistics requirements. We categorize all other clients as Transactional clients. We provide services to our Transactional clients on a shipment-by-shipment basis. For the three month periods ended March 31, 2014 and 2013 , Enterprise clients accounted for 28% and 30% , respectively, of our revenue and Transactional clients accounted for 72% and 70% , respectively, of our revenue. We expect to continue to grow both our Enterprise and Transactional client base in the future, although the rate of growth for each type of client will vary depending on opportunities in the marketplace.

Revenue recognized per shipment will vary depending on the transportation mode, fuel prices, shipment weight, density and mileage of the product shipped. The primary modes of shipment that we transact in are TL, LTL, intermodal and small parcel. Other transportation modes include domestic air, expedited services and international. Typically, our revenue is lower for an LTL shipment than for a TL shipment, and revenue per shipment is higher for shipments in modes other than TL, LTL and small parcel. Material shifts in the percentage of our revenue by transportation mode could have a significant impact on our

14

Table of Contents

revenue growth. For the three month period ended March 31, 2014 , TL accounted for 52% of our revenue, LTL accounted for 37% of our revenue, intermodal accounted for 6% of our revenue, small parcel accounted for 4% of our revenue and other transportation modes accounted for 1% of our revenue. For the three month period ended March 31, 2013 , TL accounted for 43% of our revenue, LTL accounted for 42% of our revenue, intermodal accounted for 8% of our revenue, small parcel accounted for 5% of our revenue and other transportation accounted for 2% of our revenue.

The transportation industry has historically been subject to seasonal sales fluctuations as shipments generally are lower during and after the winter holiday season because many companies ship goods and stock inventories prior to the winter holiday season. While we experience some seasonality, differences in our revenue between periods have been driven primarily by growth in our client base.

Transportation costs and net revenue

We act primarily as a service provider to add value and expertise in the procurement and execution of transportation and logistics services for our clients. Our pricing structure is primarily variable, although we have entered into a limited number of fixed fee arrangements that represent an insignificant portion of our revenue. Net revenue equals revenue minus transportation costs. Our transportation costs consist primarily of the direct cost of transportation paid to the carrier.

Net revenue is the primary indicator of our ability to add value to our clients and is considered by management to be an important measurement of our success in the marketplace. Our transportation costs are typically lower for an LTL shipment than for a TL shipment. Our net revenue margin, however, is typically higher for an LTL shipment than for a TL shipment. Material shifts in the percentage of our revenue by transportation mode, including small parcel, could have a significant impact on our net revenue. The discussion of results of operations below focuses on changes in our net revenue and expenses as a percentage of net revenue margin. For the three month periods ended March 31, 2014 and 2013 , our net revenue was $42.2 million and $38.5 million , respectively, reflecting an increase of 9.8% .

Operating expenses

Our costs and expenses, excluding transportation costs, consist of commissions paid to our sales personnel, general and administrative expenses to run our business, changes related to contingent consideration, and depreciation and amortization.

Commissions paid to our sales personnel, including employees and agents, are a significant component of our operating expenses. These commissions are based on the net revenue we collect from the clients for which such sales personnel have primary responsibility. For the three month periods ended March 31, 2014 and 2013 , commission expense was 26.6% and 25.9% , respectively, of our net revenue. The increase is due to the fluctuation of the composition of our net revenue originating from sales employees and agents. The percentage of net revenue paid as commissions will vary depending on the type of client, composition of the sales team and mode of transportation. Commission expense, stated as a percentage of net revenue, could increase or decrease in the future depending on the composition of our revenue growth and the relative impact of changes in sales teams and service offerings.

We accrue for commission expense when we recognize the related revenue. Some of our sales personnel receive a monthly advance to provide them with a more consistent income stream. Cash paid to our sales personnel in advance of commissions earned is recorded as a prepaid expense. As our sales personnel earn commissions, a portion of their commission payment is withheld and offset against their prepaid commission balance, if any. Prepaid commissions and accrued commissions are presented on a net basis on our balance sheet.

Our selling, general and administrative expenses, which exclude commission expense and changes to contingent consideration, consist of compensation costs for our sales, operations, information systems, finance and administrative support employees as well as occupancy costs, professional fees and other general and administrative expenses. For the three month periods ended March 31, 2014 and 2013 , our selling, general and administrative expenses were $23.8 million and $20.3 million , respectively. For the three month periods ended March 31, 2014 and 2013 , selling, general and administrative expenses as a percentage of net revenue were 56.5% and 52.8% , respectively. The increase is due to additional operating support, additional operating expenses related to acquisitions completed after the first quarter of 2013 and acquisition-related transaction costs associated with our 2014 acquisitions of OFS and Comcar.

Our contingent consideration expenses consist of the change in the fair value of the contingent liabilities payable to the sellers of our acquired businesses. The contingent liabilities relate to expected earn-out payments that will be paid upon the achievement of certain performance measures by our acquired businesses. These liabilities are evaluated on a quarterly basis

15

Table of Contents

and the change in the contingent consideration is included in the selling, general and administrative expenses in our consolidated statement of income. For the three month periods ended March 31, 2014 and 2013 , we recorded charges of $0.2 million and $0.8 million , respectively, related to fair value adjustments to the contingent consideration obligation.

Our depreciation expense is primarily attributable to our depreciation of computer hardware and software, equipment, furniture and fixtures and internally developed software. For the three month periods ended March 31, 2014 and 2013 , depreciation expense was $2.3 million and $2.0 million , respectively.

Our amortization expense is attributable to our amortization of intangible assets acquired from business combinations, including customer relationships, trade names and non-compete agreements. For the three month periods ended March 31, 2014 and 2013 , amortization expense was $0.7 million and $0.6 million , respectively.

Comparison of the three months ended March 31, 2014 and 2013

Revenue

Our revenue increased by $43.7 million , or 21.4% , to $247.7 million for the three month period ended March 31, 2014 , from $204.0 million for the three month period ended March 31, 2013 . The increase was attributable to the increase in the number of our clients and the total number of shipments executed on behalf of, and services provided to, these clients. Included in this increase was $15.7 million of additional revenue generated in 2014 from the acquisitions of Online Freight Services, Inc. ("OFS") and Comcar Logistics, LLC ("Comcar").

Our revenue from Enterprise clients increased by $9.2 million , or 15.1% , to $70.1 million for the three month period ended March 31, 2014 , from $60.9 million for the three month period ended March 31, 2013 , resulting from increases in the number of Enterprise clients, shipments executed on behalf of these clients and transportation rates. Our percentage of revenue from Enterprise clients decreased to 28% of our revenue for the period ended March 31, 2014 from 30% for the period ended March 31, 2013 due to an increase in the number of Transactional shipments and an increase in average revenue per Transactional account for the three month period ended March 31, 2014 compared to the same period in 2013 .

Our revenue from Transactional clients increased by $34.5 million , or 24.1% , to $177.6 million  for the three month period ended March 31, 2014 , from $143.1 million  for the three month period ended March 31, 2013 . Our percentage of revenue from Transactional clients increased to 72% of our revenue for the three month period ended March 31, 2014 , from 70% of our revenue for the three month period ended March 31, 2013 . The increase in Transactional revenue was driven by increases in both the number and productivity of sales employees as well as by the acquisitions of OFS and Comcar. Our revenue per Transactional client increased by approximately 12.7% for the three month period ended March 31, 2014 compared to the same period in 2013 .
 
Transportation costs

Our transportation costs increased by $40.0 million , or 24.1% , to $205.5 million for the three month period ended March 31, 2014 , from $165.5 million for the three month period ended March 31, 2013 . The growth in the total number of shipments accounted for most of the increase in our transportation costs during this period. Our transportation costs as a percentage of revenue increased to 83.0% for the three month period ended March 31, 2014 from 81.1% for the three month period ended March 31, 2013 due to an increased percentage of TL shipments in the composition of our sales volume. Also included in this increase is the transportation costs associated with the revenue generated from acquisitions completed after the first quarter of 2013 .

Net revenue

Net revenue increased by $3.7 million , or 9.8% , to $42.2 million for the three month period ended March 31, 2014 , from $38.5 million for the three month period ended March 31, 2013 . The growth in the total number of shipments executed on behalf of our clients accounted for most of the increase in our net revenue during this period. Net revenue margins decreased to 17.0% for the three month period ended March 31, 2014 , from 18.9% for the three month period ended March 31, 2013 . The decrease in net revenue margins was primarily the result of a higher percentage of TL revenue as a percentage of total revenue in the three month period ended March 31, 2014 when compared to the same period in 2013 .





16

Table of Contents

Operating expenses

Commission expense increased by $1.3 million , or 12.7% , to $11.2 million for the three month period ended March 31, 2014 , from $9.9 million for the three month period ended March 31, 2013 . This increase is primarily attributable to the increase in net revenue. For the three month periods ended March 31, 2014 and 2013 , commission expense was 26.6% and 25.9% , respectively, of our net revenue. This increase is due to the fluctuation of the composition of our net revenue originating from sales employees and agents.

Selling, general and administrative expenses increased by $3.5 million , or 17.4% , to $23.8 million for the three month period ended March 31, 2014 , from $20.3 million for the three month period ended March 31, 2013 . The increase is primarily the result of hiring sales personnel who are expected to drive continued growth of our business and operational personnel to support our growth in customers and shipment volume, along with acquisition-related transaction costs related to the 2014 acquisitions of OFS and Comcar. As a percentage of net revenue, selling, general and administrative expenses increased to 56.5% for the three month period ended March 31, 2014 , from 52.8% for the three month period ended March 31, 2013 . The increase, as a percentage of net revenue, is primarily attributable to increased compensation and facilities expenses associated with the growth of our business.

Contingent consideration

The change in contingent consideration resulted in a net increase to our contingent consideration obligation for the three month periods ended March 31, 2014 and 2013 . The resulting expense recognized in our consolidated statement of income from the change in the contingent consideration obligation was $0.2 million for the three month period ended March 31, 2014 compared to $0.8 million for the three month period ended March 31, 2013 . For the three month periods ended March 31, 2014 and 2013 , the increases in the contingent liability were due to greater probability of acquisitions achieving EBITDA earn-out targets and changes to the time value of money. The fair value of the contingent consideration obligation for each acquisition reflects updated probabilities as of March 31, 2014 .

Depreciation and amortization

Depreciation expense increased by $0.3 million , or 12.9% , to $2.3 million for the three month period ended March 31, 2014 , from $2.0 million for the three month period ended March 31, 2013 . The increase in depreciation expense is primarily attributable to depreciation on purchases of computer hardware and software, equipment, furniture and fixtures, and depreciation on the capitalization of internally developed software. Amortization expense increased by $0.1 million , or 17.1% , to $0.7 million for the three month period ended March 31, 2014 , from $0.6 million for the three month period ended March 31, 2013 . The increase in amortization expense is the result of additional amortization expense of intangible assets acquired after March 31, 2013 .

Income from operations

Income from operations decreased by $0.8 million , or 17.9% , to $4.0 million for the three month period ended March 31, 2014 , from $4.8 million for the three month period ended March 31, 2013 . The decrease in income from operations is attributable to the increase in operating expenses in excess of the increase in net revenue.

Other expense and income tax expense

Other expense remained relatively consistent at $0.1 million for both the three month periods ended March 31, 2014 and March 31, 2013 .

Income tax expense decreased to $1.5 million for the three month period ended March 31, 2014 , from $1.8 million for the three month period ended March 31, 2013 . This decrease was due to the decrease in income from operations discussed above. Our effective tax rate for the three month period ended March 31, 2014 increased to 38.1% , from 37.4% for the three month period ended March 31, 2013 . The increase in our effective tax rate was primarily due to the timing and reenactment of the research and development tax credit which occurred in early 2013 for both the 2012 and 2013 tax years.
    
Net Income

Net income decreased by $0.6 million , or 18.4% , to $2.4 million for the three month period ended March 31, 2014 , from $3.0 million for the three month period ended March 31, 2013 , due to the items previously discussed.


17

Table of Contents

Liquidity and Capital Resources

As of March 31, 2014 , we had $42.6 million in cash and cash equivalents, $76.1 million in working capital and $10.0 million available under our credit facility, which matures on July 31, 2014.

Cash provided by operating activities

For the three month period ended March 31, 2014 , $10.2 million of cash was provided by operating activities, representing an increase of $4.0 million compared to the three month period ended March 31, 2013 . For the three month period ended March 31, 2014 , we generated $7.4 million in cash from net income, adjusted for non-cash operating items, as compared to $7.8 million for the three month period ended March 31, 2013 . For the three month periods ended March 31, 2014 and 2013 , cash flow generation increased by $2.8 million and was offset by $1.5 million , respectively, in changes to net working capital, primarily due to the growth of our business.

Cash used in investing activities

Cash used in investing activities was $18.1 million and $4.2 million during the three month periods ended March 31, 2014 and 2013 , respectively. For the three month period ended March 31, 2014 , the primary investing activities were the acquisition related payments to OFS and Comcar, the procurement of computer hardware and software, and the internal development of computer software. For the three month period ended March 31, 2013 , the primary investing activities were related to the procurement of computer hardware and software, the internal development of computer software and the acquisition of Open Mile, Inc.

Cash (used in) provided by financing activities

During the three month period ended March 31, 2014 , net cash used in financing activities was $2.0 million compared to net cash provided by financing activities of $0.2 million for the three month period ended March 31, 2013 . For the three month period ended March 31, 2014 , the use of cash in financing activities was primarily attributable to contingent consideration payments of $1.2 million and the use of cash to satisfy employee tax withholdings upon the vesting of restricted stock. For the three month period ended March 31, 2013 , the net cash provided by financing activities was primarily related to the exercise of employee stock options offset by the use of cash to satisfy employee tax withholdings upon the vesting of restricted stock.

Credit facility

As of March 31, 2014 , we had no amounts outstanding on a $10.0 million line of credit with JPMorgan Chase Bank, N.A., which is due to expire on July 31, 2014. Any outstanding borrowings would be collateralized by substantially all of our assets. The maximum amount outstanding under our line of credit cannot exceed 80% of the book value of our eligible accounts receivable. Our line of credit contains limitations on our ability to incur indebtedness, create liens and make certain investments. Interest on the line of credit is payable monthly at an interest rate equal to either: (1) the prime rate or (2) LIBOR plus 1.75%. We have discretion in determining if specific advances against the line of credit are drawn down as a prime rate advance or a LIBOR advance. The terms of the credit line include various covenants, including covenants that require us to maintain a maximum leverage ratio and a minimum interest coverage ratio. As of March 31, 2014 , we were in compliance with all of these covenants.

Anticipated uses of cash

Our priority is to continue to grow our revenue and net revenue. We anticipate that our operating expenses and planned expenditures will constitute a material use of cash, and we expect to use available cash to expand our sales force, to enhance our technology, to acquire or make strategic investments in complementary businesses, and for working capital and other general corporate purposes. We also expect to use available cash to make approximately $4.6 million of potential earn-out payments for the remainder of 2014 due in connection with our acquisitions. We currently expect to use up to $11.0 million for capital expenditures for the remainder of 2014 . We expect our use of cash for working capital purposes and other purposes to be offset by the cash flow generated from operating activities during the same period.

Historically, our average accounts receivable lifecycle has been longer than our average accounts payable lifecycle, meaning that we have used cash to pay carriers in advance of collecting from our clients. We elect to provide this benefit to foster strong relationships with our clients and carriers. As our business grows, we expect this use of cash to continue. The amount of cash we use will depend on the growth of our business.


18

Table of Contents

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements.



Recent Accounting Pronouncements

In July 2013, the FASB issued authoritative guidance under Accounting Standard Update ("ASU") 2013-11, which provides guidance on the financial statement presentation of an unrecognized tax benefit when a net operating loss (“NOL”) carryforward, a similar tax loss, or a tax credit carryforward exists. ASU 2013-11 requires entities to present an unrecognized tax benefit as a reduction of a deferred tax asset for a NOL or tax credit carryforward whenever the NOL or tax credit carryforward would be available to reduce the additional taxable income or tax due if the tax position is disallowed. This accounting standard update requires entities to assess whether to net the unrecognized tax benefit with a deferred tax asset as of the reporting date. The provisions of this new guidance were effective as of the beginning of our 2014 fiscal year and did not have a material impact on our financial statements.


Item 3.     Quantitative and Qualitative Disclosures About Market Risk

Commodity Risk

We pass through increases in fuel prices to our clients. As a result, we believe that there is no material risk exposure to fluctuations in fuel prices.

Interest Rate Risk

We have exposure to changes in interest rates on our line of credit. The interest rate on our line of credit fluctuates based on the prime rate or LIBOR plus 1.75%. Assuming the $10.0 million line of credit was fully drawn, a 1.0% increase in the prime rate would increase our annual interest expense by $100,000.

Our interest income is sensitive to changes in the general level of U.S. interest rates, in particular because all of our investments are in cash equivalents. Due to the short-term nature of our investments, we believe that there is no material risk exposure.

We do not use derivative financial instruments for speculative trading purposes.

Impact of Inflation

We believe that our results of operations are not materially impacted by moderate changes in the inflation rate. Inflation and changing prices did not have a material impact on our operations for the three months ended March 31, 2014 and 2013 .


19

Table of Contents

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of March 31, 2014 . The term "disclosure controls and procedures," as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the "Exchange Act"), means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of March 31, 2014 , our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, the Company's disclosure controls and procedures were effective at the reasonable assurance level.

Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Our internal control system was designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the consolidated financial statements for external purposes in accordance with generally accepted accounting principles. Based on its evaluation, management concluded that our internal control over financial reporting was effective as of March 31, 2014 .

Changes in internal control over financial reporting

There have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarterly period ended March 31, 2014 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.


20

Table of Contents

PART II. OTHER INFORMATION

Item 1.    Legal Proceedings

In the normal course of business, we are subject to potential claims and disputes related to our business, including claims for freight lost or damaged in transit. Some of these matters may be covered by our insurance and risk management programs or may result in claims or adjustments with our carriers.

Effective July 1, 2012 the Company acquired the assets of Shipper Direct, a truckload transportation brokerage located near Nashville, Tennessee. In August 2012, the Company discovered that the revenue and profitability of the acquired business, both prior and subsequent to the acquisition, were not as expected based on representations contained in the Asset Purchase Agreement. The Company believes the representations made in the Asset Purchase Agreement were fraudulent. The founders of Shipper Direct, who had become employees of the Company, were terminated as a result, and the Company requested that the sellers return the entire purchase price and that the contingent consideration provision of the Asset Purchase Agreement be voided. However, the Company received only $1,779,554 . On September 25, 2012, the sellers asserted indemnification claims against the Company under the indemnification provisions of the Asset Purchase Agreement for $2,400,000 , including a claim for the repayment of the $1,779,554 return of purchase price. The Company believes the sellers' indemnification claims are without merit and intends to vigorously defend against any legal action taken by the sellers with respect to their indemnification claims.

In November 2012, the founders filed a complaint with the U.S. Department of Labor alleging that their employment was wrongfully terminated in violation of the whistleblower provisions of Sarbanes-Oxley. On August 27, 2013, this action was terminated in the Company's favor when the founders voluntarily withdrew their complaint.

In January 2013, the Company filed a lawsuit in the U.S. District Court for the Northern District of Illinois against Shipper Direct, the founders and others alleging, among other things, breach of contract and fraud. The lawsuit is seeking monetary damages of $2,500,000 . On May 28, 2013, the Company obtained a default judgment against the founders, which the founders subsequently attempted to vacate. On April 28, 2014, the Company learned that the default judgment will stand. The monetary amount of the judgment will be determined after a hearing on May 14, 2014.

Management does not believe that the outcome of any of the legal proceedings to which we are a party will have a material adverse effect on our financial position or results of operations.


Item 1A.    Risk Factors

There have been no material changes from the risk factors described in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2013 .


21

Table of Contents

Item 6.    Exhibits
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


22

Table of Contents

SIGNATURES

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

 
 
 
ECHO GLOBAL LOGISTICS, INC.
 
 
 
 
 
 
Date:
May 1, 2014
 
 
 
/s/ DOUGLAS R. WAGGONER
 
 
 
By:
 
Douglas R. Waggoner
Chief Executive Officer
 
 
 
 
 
 
Date:
May 1, 2014
 
 
 
/s/ KYLE L. SAUERS
 
 
 
By:
 
Kyle L. Sauers
Chief Financial Officer


23

Table of Contents

EXHIBIT INDEX
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


24


EXHIBIT 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
ECHO GLOBAL LOGISTICS, INC.
PURSUANT TO
SECTION 302 Of THE SARBANES-OXLEY ACT OF 2002

I, Douglas R. Waggoner, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Echo Global Logistics, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange 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 we have:
a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
b)    designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this quarterly report based on such evaluation; and
d) disclosed in this quarterly report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting.

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably 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 internal control over financial reporting.

Date:
May 1, 2014
 
/s/ DOUGLAS R. WAGGONER
 
 
 
Douglas R. Waggoner
Chief Executive Officer






EXHIBIT 31.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
ECHO GLOBAL LOGISTICS, INC.
PURSUANT TO
SECTION 302 Of THE SARBANES-OXLEY ACT OF 2002

I, Kyle L. Sauers, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Echo Global Logistics, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange 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 we have:
a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
b)    designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this quarterly report based on such evaluation; and
d) disclosed in this quarterly report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting.

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably 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 internal control over financial reporting.

Date:
May 1, 2014
 
/s/ KYLE L. SAUERS
 
 
 
Kyle L. Sauers
Chief Financial Officer





EXHIBIT 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

I, Douglas R. Waggoner, Chief Executive Officer of Echo Global Logistics, Inc. (the "Company"), hereby certify, that:

(1) The Company's quarterly report on Form 10-Q for the quarterly period ended March 31, 2014 (the "Form 10-Q") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
(2) The information contained in the Form 10-Q fairly presents, in all material aspects, the financial condition and results of operations of the Company.

May 1, 2014
 
/s/ DOUGLAS R. WAGGONER
 
 
Douglas R. Waggoner
Chief Executive Officer





EXHIBIT 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

I, Kyle L. Sauers, Chief Financial Officer of Echo Global Logistics, Inc. (the "Company"), hereby certify, that:

(1) The Company's quarterly report on Form 10-Q for the quarterly period ended March 31, 2014 (the "Form 10-Q") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
(2) The information contained in the Form 10-Q fairly presents, in all material aspects, the financial condition and results of operations of the Company.

May 1, 2014
 
/s/ KYLE L. SAUERS
 
 
Kyle L. Sauers
Chief Financial Officer