UNITED STATES


SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549


____________________________________________


FORM 10-Q


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xQuarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934For the quarterly period ended March 31, 2011oTransition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934For the transition period from _________ to _________Commission File Number 001-34470


____________________________________________





ECHO GLOBAL LOGISTICS, INC.


(Exact Name of Registrant as Specified in its Charter)


____________________________________________


Delaware20-5001120(State or Other Jurisdiction ofIncorporation or Organization)(I.R.S. Employer Identification No.)600 West Chicago AvenueSuite 725Chicago, Illinois 60654Phone: (800) 354-7993(As (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: o 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:oAccelerated filer:xNon-accelerated filer:oSmaller reporting companyo(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 May 4, 2011, the Registrant had 22,130,483 shares of Common Stock, par value $0.0001 per share, outstanding.


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PagePART I. FINANCIAL INFORMATIONItem 1.Consolidated Financial Statements3Consolidated Statements of Income for the three months ended March 31, 2010 and 2011 (Unaudited)3Consolidated Balance Sheets as of December 31, 2010 and March 31, 2011 (Unaudited)4Consolidated Statements of Cash Flows for the three months ended March 31, 2010 and 2011 (Unaudited)5Consolidated Statements of Stockholders' Equity for the three months ended March 31, 2011 (Unaudited)6Notes to Unaudited Consolidated Financial Statements7Item 2.Management's Discussion and Analysis of Financial Condition and Results of Operations15Item 3.Quantitative and Qualitative Disclosures about Market Risk20Item 4.Controls and Procedures22PART II. OTHER INFORMATIONItem 1.Legal Proceedings23Item 1A.Risk Factors23Item 6.Exhibits23SIGNATURES24EXHIBIT INDEX25





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Table of Contents


PART I. FINANCIAL INFORMATION








Item 1.    Consolidated Financial Statements








Echo Global Logistics, Inc.


Consolidated Statements of Income


(Unaudited)


Three Months EndedMarch 31,20102011REVENUE$89,104,024$129,445,571COSTS AND EXPENSES:Transportation costs$72,059,487$103,919,616Selling, general, and administrative expenses13,335,11719,989,273Depreciation and amortization1,682,5861,948,054INCOME FROM OPERATIONS2,026,8343,588,628Interest income12,46332,999Interest expense(22,842)(5,696)Other, net(39,337)(63,641)OTHER EXPENSE(49,716)(36,338)INCOME BEFORE PROVISION FOR INCOME TAXES1,977,1183,552,290INCOME TAX EXPENSE(741,147)(1,310,891)NET INCOME1,235,9712,241,399Basic net income per share$0.06$0.10Diluted net income per share$0.06$0.10


See accompanying notes.





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Echo Global Logistics, Inc.


Consolidated Balance Sheets


December 31, 2010March 31, 2011(Unaudited)AssetsCurrent assets:Cash and cash equivalents$43,218,164$43,198,262Accounts receivable, net of allowance for doubtful accounts of $2,786,776 and $2,839,938, respectively60,862,01271,239,058Income taxes receivable—370,534Prepaid expenses7,518,3346,801,876Other current assets396,613310,971Total current assets111,995,123121,920,701Property and equipment, net9,638,80010,086,252Intangible assets:Goodwill32,597,57735,888,356Intangible assets, net of accumulated amortization of $4,098,246 and $4,715,510, respectively6,974,8186,784,004Other assets341,863316,863Total assets$161,548,181$174,996,176Liabilities and stockholders' equityCurrent liabilities:Accounts payable-trade$40,097,083$48,866,909Current maturities of capital lease obligations274,282249,375Due to seller-short term2,720,5172,649,926Accrued expenses3,398,6203,568,195Income tax payable125,111—Deferred income taxes1,788,2861,768,070Total current liabilities48,403,89957,102,475Due to seller-long term7,073,1028,350,993Deferred income taxes946,6081,354,287Capital lease obligations, net of current maturities146,55992,390Total liabilities56,570,16866,900,145Stockholders' equity:Common stock, par value $0.0001 per share, 100,000,000 shares authorized, 22,043,850 and 22,115,887 shares were issued and outstanding at December 31, 2010 and March 31, 2011, respectively2,2052,212Additional paid-in capital91,152,07092,028,682Retained earnings13,823,73816,065,137Total stockholders' equity104,978,013108,096,031Total liabilities and stockholders' equity$161,548,181$174,996,176


See accompanying notes.





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Echo Global Logistics, Inc.


Consolidated Statements of Cash Flows


(Unaudited)


Three Months Ended March 31,20102011Operating activitiesNet income$1,235,971$2,241,399Adjustments to reconcile net income to net cash provided by (used in) operating activities:Deferred income taxes721,122387,463Noncash stock compensation expense207,918251,795Reduction in contingent consideration due to seller(1,264,798)(108,684)Depreciation and amortization1,682,5861,948,054Change in assets, net of acquisitions:Accounts receivable(5,574,680)(8,901,884)Taxes receivable / payable—(495,645)Prepaid expenses and other assets(842,004)827,100Change in liabilities, net of acquisitions:Accounts payable2,978,1687,160,139Accrued expenses and other(660,984)(784,128)Net cash provided by (used in) operating activities(1,516,701)2,525,609Investing activitiesPurchases of property and equipment(1,574,746)(1,778,242)Payments for acquisitions, net of cash aquired(2,605,752)(1,113,017)Net cash used in investing activities(4,180,498)(2,891,259)Financing activitiesPrincipal payments on capital lease obligations(73,612)(79,076)Tax benefit of stock options exercised—47,074Payment of contingent consideration—(200,000)Payment of costs associated with initial public offering(278,267)—Issuance of shares, net of issuance costs17,790577,750Net cash provided by (used in) financing activities(334,089)345,748Decrease in cash and cash equivalents(6,031,288)(19,902)Cash and cash equivalents, beginning of period47,803,70443,218,164Cash and cash equivalents, end of period$41,772,416$43,198,262Supplemental disclosure of cash flow informationCash paid during the year for interest$22,842$6,750Cash paid for income taxes18,3961,372,000Non-cash financing activityDue to seller2,602,5111,515,984


See accompanying notes.





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Echo Global Logistics, Inc.


Consolidated Statements of Stockholders' Equity


Three Months Ended March 31, 2011


(Unaudited)





Common StockAdditionalPaid-InCapitalSharesAmountRetainedEarningsTotalBalance at December 31, 201022,043,850$2,205$91,152,070$13,823,738$104,978,013Share compensation expense——251,795—251,795Exercise of stock options72,0377577,743—577,750Tax benefit from exercise of stock options——47,074—47,074Net income———2,241,3992,241,399Balance at March 31, 201122,115,887$2,212$92,028,682$16,065,137$108,096,031





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Echo Global Logistics, Inc. and Subsidiaries


Notes to Unaudited Consolidated Financial Statements


Three Months Ended March 31, 2010 and 2011





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, 2011 are not necessarily indicative of the results expected for the full year of 2011. These interim consolidated financial statements should be read in conjunction with the 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 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 value of the Company's financial investments, which consist of cash and cash equivalents, accounts receivable, accounts payable and capital lease obligations, approximate their fair values due to their short term nature. The fair value of the due to seller obligation is determined based on the likelihood of contingent earn-out payments.








2. New Accounting Pronouncements





In October 2009, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Codification ("ASC") Topic 605, Revenue Recognition . The guidance addresses the accounting for multiple-deliverable arrangements to enable vendors to account for products or services (deliverables) separately rather than as a combined unit. The guidance is effective prospectively for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010, with early adoption permitted. The adoption of did not have a material impact on the Company's consolidated financial statements.


In January 2009, the Securities and Exchange Commission  issued Release No. 33-9002, Interactive Data to Improve Financial Reporting . The rule requires all companies to provide their financial statements and financial statement schedules to the SEC and on their corporate websites in interactive data format using the eXtensible Business Reporting Language ("XBRL"), which is an electronic language specifically for the communication of business and financial data. The intention of XBRL is to improve its usefulness to users and to automate regulatory filings and business information processing. Interactive data has the potential to improve efficiencies and the analyses of financial disclosures by investors and other users. The Company is required to adopt this rule for the reporting period ended after June 15, 2011. The adoption of this rule will not have a material impact on the Company's consolidated financial statements.


In January 2010, the FASB issued ASC 820, Fair Value Measurements and Disclosures . This guidance improves disclosures originally required under SFAS No. 157. ASU 2010-16 is effective for interim and annual periods beginning after December 15, 2009, except for the disclosures about purchases, sales, issuances and settlements in the roll forward of activity


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Table of Contents
 Echo Global Logistics, Inc. and Subsidiaries
 Notes to Unaudited Consolidated Financial Statements
 Three Months Ended March 31, 2010 and 2011


in Level 3 fair value measurements. Those disclosures are effective for fiscal years beginning after December 15, 2010, and for interim periods within those years. The adoption of this guidance did not have a material impact on the Company's consolidated financial statements.


In December 2010, the FASB issued ASU 2010-29 to amend ASC 805, Business Combinations . The ASU amends certain existing and adds additional pro forma disclosure requirements for public enterprises (as defined by Topic 805). The guidance in ASU 2010-29 is effective for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2010 and must be applied on a prospective basis. The adoption of this guidance did not have a material impact on the Company's consolidated financial statements.








Table of Contents
 Echo Global Logistics, Inc. and Subsidiaries
 Notes to Unaudited Consolidated Financial Statements
 Three Months Ended March 31, 2010 and 2011


3. Acquisitions





Mountain Logistics Acquisition





Effective May 1, 2007, the Company acquired Mountain Logistics, Inc., a non-asset based third-party logistics provider with offices in Park City, Utah and Los Angeles, California.  For the year ended December 31, 2010 and three month period ended March 31, 2011 , the Company paid $1,850,000 and $250,000, respectively, in contingent consideration related to this 2007 acquisition. The contingent consideration paid was recorded as additional goodwill as of December 31, 2010 and March 31, 2011 , in accordance with accounting guidance prior to the Company's adoption of ASC 805 Business Combinations on January 1, 2009.





Distribution Services Inc .





Effective January 1, 2010, the Company acquired Distribution Services Inc. (DSI), a non-asset based third-party logistics provider with offices in Coon Rapids, Minnesota, and the results of DSI have been included in the unaudited consolidated financial statements since that date. The Company agreed to purchase the assets and assume certain liabilities of DSI for $728,056. An additional $2,080,000 in cash consideration may become payable upon achievement of certain performance measures by or prior to December 31, 2014. As a result of the acquisition, the Company recorded $1,947,161 of goodwill, of which $1,817,264 related to contingent consideration.  For the three month periods ended March 31, 2010 and 2011 , the Company recorded a decrease of $9,208 and an increase of $103,149 , respectively, to the contingent consideration obligation as a result of adjustments to the forecasted financial performance of DSI, resulting in a liability due to seller of $1,624,810 at March 31, 2011 . The increase in contingent consideration is included in selling, general and administrative expenses in the consolidated statement of income. The Company expects total undiscounted contingent consideration payments to DSI to be approximately $2,100,000. Pro forma results of the acquisition have not been included as the acquisition does not have a material impact on the Company's financial statements.   The amount of goodwill deductible for U.S. income tax purposes is approximately $740,000, excluding future contingent consideration payments.





Resource Group and Associates





Effective January 1, 2010, the Company acquired Resource Group and Associates (RGA), a non-asset based third-party logistics provider with offices in Andover, Minnesota, and the results of RGA have been included in the unaudited consolidated financial statements since that date. The Company agreed to purchase the assets and assume certain liabilities of RGA for $1,027,696. At the time of the acquisition, an additional $1,000,000 in cash consideration may have become payable upon achievement of certain performance measures by or prior to December 31, 2012. As a result of the acquisition, the Company recorded $1,383,867 of goodwill, of which $785,248 is related to contingent consideration.  In January 2011, the Company paid RGA $200,000 as certain performance measures of the purchase agreement has been met as of December 31, 2010.  This payment reduced the contingent consideration liability.  For the three month periods ended March 31, 2010 and 2011 , the Company recorded an increase of $22,566 and $14,295 , respectively, to the contingent consideration obligation as a result of adjustments to the forecasted financial performance of RGA resulting in a liability due to seller of $511,744 at March 31, 2011 .  The increase in contingent consideration is included in selling, general and administrative expenses in the consolidated statement of income. The Company expects total undiscounted contingent consideration payments to RGA to be $600,000. Pro forma results of the acquisition have not been included as the acquisition does not have a material impact on the Company's financial statements. The amount of goodwill deductible for U.S. income tax purposes is approximately $550,000, excluding future contingent consideration payments.





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Table of Contents
 Echo Global Logistics, Inc. and Subsidiaries
 Notes to Unaudited Consolidated Financial Statements
 Three Months Ended March 31, 2010 and 2011


Lubenow Logistics, LLC





Effective May 1, 2010, the Company acquired Lubenow Logistics, LLC (Lubenow), a non-asset based third-party logistics provider with offices in Green Bay, Wisconsin, and the results of Lubenow have been included in the unaudited consolidated financial statements since that date. The Company agreed to purchase the assets and assume certain liabilities of Lubenow for $522,500. An additional $1,400,000 in cash consideration may become payable upon achievement of certain performance measures by or prior to April 30, 2015. As a result of the acquisition, the Company recorded $1,077,859 of goodwill, of which $994,780 is related to contingent consideration. For the three month period ended March 31, 2011 , the Company recorded a decrease of $91,255 to the contingent consideration obligation as a result of adjustments to the forecasted financial performance of Lubenow, resulting in a liability due to seller of $891,069 at March 31, 2011 . The decrease in contingent consideration is included in selling, general and administrative expenses in the consolidated statement of income. The Company expects total undiscounted contingent consideration payments to Lubenow to be approximately $1,100,000. Pro forma results of the acquisition have not been included as the acquisition does not have a material impact on the Company's financial statements.  The amount of goodwill deductible for U.S. income tax purposes is approximately $400,000, excluding future contingent consideration payments.





Freight Lanes International Inc.





Effective September 1, 2010, the Company acquired Freight Lanes International Inc. (FLI), a non-asset based third-party logistics provider with offices in Bend, Oregon, and the results of FLI have been included in the unaudited consolidated financial statements since that date. The Company agreed to purchase the assets and assume certain liabilities of FLI for $658,300. An additional $1,220,000 in cash consideration may become payable upon achievement of certain performance measures by or prior to August 31, 2014. As a result of the acquisition, the Company recorded $1,033,436 of goodwill, of which $914,406 is related to contingent consideration. For the three month period ended March 31, 2011 , the Company recorded a decrease of $376,631 to the contingent consideration obligation as a result of adjustments to the forecasted financial performance of FLI, resulting in a liability due to seller of $568,571 at March 31, 2011 . The decrease in contingent consideration is included in selling, general and administrative expenses in the consolidated statement of income. The Company expects total undiscounted contingent consideration payments to FLI to be between $700,000 and $900,000. Pro forma results of the acquisition have not been included as the acquisition does not have a material impact on the Company's financial statements.  The amount of goodwill deductible for U.S. income tax purposes is approximately $335,000, excluding future contingent consideration payments.





DNA Freight Inc.





Effective December 1, 2010, the Company acquired DNA Freight Inc. (DNA), a non-asset based third-party logistics provider with offices in San Francisco, California, and the results of DNA have been included in the unaudited consolidated financial statements since that date. The Company agreed to purchase the assets and assume certain liabilities of DNA for $4,583,076. An additional $5,920,000 in cash consideration may become payable upon achievement of certain performance measures by or prior to November 30, 2014. As a result of the acquisition, the Company recorded $7,411,059 of goodwill, of which $4,122,071 is related to contingent consideration. For the three month period ended March 31, 2011 , the Company recorded a decrease of $62,350 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 DNA, resulting in a liability due to seller of $4,147,310 at March 31, 2011 . The decrease in contingent consideration is included in selling, general and administrative expenses in the consolidated statement of income. The Company expects total undiscounted contingent consideration payments to DNA to be between $5,400,000 and $5,900,000. As of March 31, 2011 , the purchase price allocation has not been finalized due to the timing of the acquisition and terms of the purchase agreement. Pro forma results of the acquisition have been not been included as the acquisition does not have a material impact on the Company's financial statements. The amount of goodwill deductible for U.S. income tax purposes is approximately $2,850,000, excluding future contingent consideration payments.





Nationwide Traffic Services, LLC.





Effective January 1, 2011, the Company acquired Nationwide Traffic Services, LLC. (Nationwide), a non-asset based third-party logistics provider with offices in Santa Fe, California, and the results of Nationwide have been included in the unaudited consolidated financial statements since that date. The Company agreed to purchase the assets and assume certain liabilities of Nationwide for $873,768. An additional $1,750,000 in cash consideration may become payable upon achievement


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 Echo Global Logistics, Inc. and Subsidiaries
 Notes to Unaudited Consolidated Financial Statements
 Three Months Ended March 31, 2010 and 2011


of certain performance measures by or prior to December 31, 2014. As a result of the acquisition, the Company recorded $2,182,378 of goodwill, of which $1,515,984 is related to contingent consideration. For the three month period ended March 31, 2011 , the Company recorded an increase of $22,246 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 Nationwide, resulting in a liability due to seller of $1,538,230 at March 31, 2011 . The increase in contingent consideration is included in selling, general and administrative expenses in the consolidated statement of income. The Company expects total undiscounted contingent consideration payments to Nationwide to be approximately $1,750,000. As of March 31, 2011 , the purchase price allocation has not been finalized due to the timing of the acquisition and terms of the purchase agreement. Pro forma results of the acquisition have not been included as the acquisition does not have a material impact on the Company's financial statements. The amount of goodwill deductible for U.S. income tax purposes is approximately $840,000, excluding future contingent consideration payments.





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 assets primarily relate to money market funds and financial liabilities primarily relate to contingent earn-out payments of $11.0 million .





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:





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|• | Level 1: Inputs are quoted prices in active markets for identical assets or liabilities.

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|• | 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.

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|• | 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 the associated discount rate. The probability of the contingent consideration ranges from 5% to 55%, with a discount rate of 12%. 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, 2011 :





Total Fair ValueMeasurementLevel 1Level 2Level 3Assets:Money market funds$33,437,847$33,437,847$—$—Liabilities:Due to seller$(11,000,919)$—$—$(11,000,919)





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 SellerBalance at December 31, 2010$(9,793,619)Increase related to new acquisitions(1,515,984)Change in fair value108,684Payment of contingent consideration200,000Balance at March 31, 2011$(11,000,919)





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 Echo Global Logistics, Inc. and Subsidiaries
 Notes to Unaudited Consolidated Financial Statements
 Three Months Ended March 31, 2010 and 2011


For the three month period ended March 31, 2011 , the Company recorded an adjustment to the original contingent consideration obligations recorded upon the acquisitions of FMI, DSI, RGA, Lubenow, FLI, DNA and Nationwide. The adjustments were the result of using revised forecasts and updated fair value measurements that adjusted the Company's potential earnout payments related to the purchases of these businesses.





For the three month periods ended March 31, 2010 and 2011 , the Company recognized a benefit of $1,264,798 and $108,684 , 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.





5. Intangible Assets





The following is a rollforward of goodwill from December 31, 2010 to March 31, 2011 :





Balance as of December 31, 2010$32,597,577Additional purchase price related to the purchase of Mountain Logistics, Inc.250,000Additional goodwill acquired related to the purchase of FLI31,400Additional goodwill acquired related to the purchase of DNA827,001Goodwill acquired related to the purchase of Nationwide2,182,378Balance as of March 31, 2011$35,888,356





The following is a summary of amortizable intangible assets as of December 31, 2010 and March 31, 2011 :





December 31, 2010March 31, 2011Weighted-Average LifeCustomer relationships$10,744,064$11,170,5146.4 yearsNoncompete agreements139,000139,0002.9 yearsTrade names190,000190,0003.0 years11,073,06411,499,5146.3 yearsLess accumulated amortization(4,098,246)(4,715,510)Intangible assets, net$6,974,818$6,784,004





Amortization expense related to intangible assets was $418,612 and $617,264 for the three months ended March 31, 2010 and 2011 , respectively.





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





Remainder of 2011$1,851,79220121,881,33520131,198,3612014839,8812015624,999Thereafter387,636$6,784,004





6. Accrued Expenses





The components of accrued expenses at December 31, 2010 and March 31, 2011 are as follows:


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 Echo Global Logistics, Inc. and Subsidiaries
 Notes to Unaudited Consolidated Financial Statements
 Three Months Ended March 31, 2010 and 2011


December 31, 2010March 31, 2011Accrued compensation$489,736$511,487Accrued rebates1,412,7151,331,300Deferred rent760,112739,792Other736,057985,616Total accrued expenses$3,398,620$3,568,195





7. Income Taxe s





The following table shows the Company's effective income tax rate for the three months ended March 31, 2010 and 2011 :





Three Months Ended March 31,20102011Income before provision for income taxes$1,977,118$3,552,290Income tax expense(741,147)(1,310,891)Effective tax rate37.5%36.9%








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 weighted average shares outstanding plus share equivalents that would arise from the exercise of share options and the conversion of preferred shares. Employee stock options totaling 86,500 and 119,500 for the three month periods ended March 31, 2010 and 2011, respectively, were excluded from the calculation of diluted earnings per share, as they were anti-dilutive. The computation of basic and diluted earnings per common share for the three month periods ended March 31, 2010 and 2011 are as follows:








Three Months Ended March 31,20102011Numerator:Net income$1,235,971$2,241,399Denominator:Denominator for basic earnings per share-weighted-average shares21,768,66122,088,860Effect of dilutive securities:Employee stock options401,895439,990Denominator for dilutive earnings per share22,170,55622,528,850Basic net income per common share$0.06$0.10Diluted net income per common share$0.06$0.10


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 Notes to Unaudited Consolidated Financial Statements
 Three Months Ended March 31, 2010 and 2011


9. Stock-Based Compensation Plans





Using the Black-Scholes-Merton option valuation model and the assumptions listed below, the Company recorded $207,918 and 251,795 in compensation expense with corresponding tax benefits of $81,088 and $98,200 for the three month periods ended March 31, 2010 and 2011 , respectively.  During the three month periods ended March 31, 2010 and 2011 , the Company granted 440,000 and 142,750 options, respectively, to various employees.  The Company also granted 192,750 shares of restricted stock during the three month period ended March 31, 2011 to various employees.





The following assumptions were utilized in the valuation for options granted during the three months ended March 31, 2010 and 2011 :





20102011Dividend yield——Risk-free interest rate3.05%3.37%Weighted-average expected life6.6 years7.5 yearsVolatility36.0%35.2%





Table of Contents
 Echo Global Logistics, Inc. and Subsidiaries
 Notes to Unaudited Consolidated Financial Statements
 Three Months Ended March 31, 2010 and 2011


10. Related Parties





Certain stockholders and directors of the Company have a direct and/or indirect ownership interest in InnerWorkings, Inc. (InnerWorkings), a publicly-traded company that provides print procurement services. InnerWorkings is one of the Company's stockholders. As of March 31, 2011 , InnerWorkings owned 270,365 shares of the Company's common stock, or 1.2% of total shares outstanding on a fully-diluted basis.





The Company provides transportation and logistics services to InnerWorkings.  The Company recognized revenue of $1,658,787 and $1,709,056 for the three month periods ended March 31, 2010 and 2011 , respectively.  The Company also has a rebate program in place with InnerWorkings in association with the transportation and logistics services provided and InnerWorkings provides print and procurement services to the Company.





As of December 31, 2010 and March 31, 2011 , the Company had a net receivable due from InnerWorkings of $941,669 and $1,659,194 , respectively.  The Company had accounts payable of $184,803 and $207,720 due to InnerWorkings as of December 31, 2010 and March 31, 2011 , respectively.





During 2010, Matthew W. Ferguson, an executive officer at CareerBuilder.com, a privately-held online job website, became a member of the Company's Board of Directors.  CareerBuilder.com provides the Company with online job posting services.





The Company subleases a portion of its office space to Groupon, Inc. (Groupon), an e-commerce marketplace, whose investors include certain stockholders and directors of the Company. The sublease agreement was entered into on May 1, 2009 and was subsequently amended effective November 1, 2009. The agreement requires the Company to provide 30-days notice in advance of cancelling the sublease. For the three month period ended March 31, 2011 , the Company received sublease rental income of $37,044 . The Company had no amounts due to or from Groupon as of December 31, 2010 and March 31, 2011 .





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 Echo Global Logistics, Inc. and Subsidiaries
 Notes to Unaudited Consolidated Financial Statements
 Three Months Ended March 31, 2010 and 2011


11. Legal Matte rs





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 October 2010,  the Company filed a lawsuit against one of its former enterprise clients demanding payment of outstanding amounts due.  Management believes all billed amounts, approximately $2.7 million, are due and collectible and as such, the entire amount due is reflected in accounts receivable as of March 31, 2011 and the allowance for doubtful accounts has not been adjusted.  Concurrently, a lawsuit was filed by this client against the Company alleging damages of approximately $2.5 million.  Management believes this lawsuit is without merit and intends to vigorously dispute this claim.





Management does not believe that the outcome of any of the legal proceedings to which the Company is a party will have a materially adverse effect on its financial position or results of operations.


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





Overview





We are a leading provider of technology enabled transportation and supply chain management services, delivered on a proprietary technology platform serving the transportation and logistics needs of our clients. Our proprietary web-based technology platform compiles and analyzes data from our network of over 24,000 transportation providers to serve our clients' shipping and freight management needs. Our technology platform, composed of web-based software applications and a proprietary database, enables us to identify excess transportation capacity, obtain competitive rates and execute thousands of shipments every day while providing high levels of service and reliability. We focus primarily on arranging transportation across the major modes, including truckload (TL), less than truck load (LTL) and small parcel, and we also offer inter-modal (which involves moving a shipment by rail and truck), domestic air, expedited and international transportation services.





We procured transportation and provided logistics services for more than 14,000 clients for the period ended March 31, 2011 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.





Results of Operations





The following table represents certain statement of operations data:





Three months ended March 31,20102011(dollars and shares in thousands, except per share data)Consolidated statements of operations data:Revenue89,104129,446Transportation costs72,059103,920Net revenue17,04525,526Operating expenses:Commissions5,2287,673General and administrative9,37212,425Contingent consideration(1,265)(109)Depreciation and amortization1,6831,948Total operating expenses15,01821,937Income from continuing operations2,0273,589Other income (expense)(50)(37)Income before income taxes1,9773,552Income tax expense(741)(1,311)Net income1,2362,241Net income per share of common stock:Basic$0.06$0.10Diluted$0.06$0.10Shares used in per share calculations:Basic21,76922,089Diluted22,17122,529








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 $89.1 million and $129.4 million for the three month


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periods ended March 31, 2010 and 2011 , respectively, a year over year increase in revenue of 45.3% .





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 exclusive for a certain 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. As of March 31, 2011 , we had 154 enterprise clients and, for the three month period ended March 31, 2011 , we served over 14,000 transactional clients. For the three month period ended March 31, 2011 , we entered into contracts with 6 new enterprise clients. For the three month periods ended March 31, 2010 and 2011 , enterprise clients accounted for 42% and 33% , respectively, and transactional clients accounted for 58% and 67% , 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 and density and mileage of the product shipped. The primary modes of shipment that we transact in are TL, LTL and small parcel. Other transportation modes include inter-modal, 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 revenue growth. For the three month period ended March 31, 2011 , LTL accounted for 50% of our revenue, TL accounted for 33% of our revenue, small parcel accounted for 5% of our revenue and other transportation modes accounted for 12% 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 fee 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 consists 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. Although our transportation costs are typically lower for an LTL shipment than for a TL shipment, our net revenue margin 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, 2010 and 2011 , our net revenue was $17.0 million and $ 25.5 million , respectively, reflecting a growth rate of 50% .





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 they have primary responsibility. For the three month periods ended March 31, 2010 and 2011 , commission expense was 30.7% and 30.1% , respectively, as a percentage of our net revenue. 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


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commissions earned is reflected as a prepaid expense on our balance sheet. As our sales personnel earn commissions, a portion of their commission payment is withheld and offset against their prepaid commission balance, if any.





Our general and administrative expenses, which exclude commission expense, primarily consist of compensation costs for our sales, operations, information systems, finance and administrative support employees. For the three month periods ended March 31, 2010 and 2011 , our general and administrative expenses were $9.4 million and $12.5 million , respectively. For the three month periods ended March 31, 2010 and 2011 , general and administrative expenses as a percentage of net revenue were 55.0% and 48.7% , respectively.





Our contingent consideration expenses consist of the change in the fair market 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 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, 2010 and 2011 , we recorded a benefit of $1.3 million and $0.1 million , respectively.





Our depreciation expense is primarily attributable to our depreciation of purchases of computer hardware and software, equipment, furniture and fixtures, and internally developed software. For the three month periods ended March 31, 2010 and 2011 , depreciation expense was $1.3 million and $1.3 million , respectively.





Our amortization expense is attributable to our amortization of intangible assets acquired from business combinations, including client relationships, tradenames and non-compete agreements. For the three month periods ended March 31, 2010 and 2011 , amortization expense was $0.4 million and $0.6 million , respectively.








Comparison of three months ended March 31, 2011 and 2010





Revenue





Our revenue increased by $40.3 million , or 45.3% , to $129.4 million for the three month period ended March 31, 2011 from $89.1 million for the three month period ended March 31, 2010 . 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. In addition, this increase was partially due to an increase in both less-than-truckload and truckload rates due to tighter capacity in the marketplace. In addition, $13.6 million of revenue was generated for the three month period ended March 31, 2011 from acquisitions completed in 2010 and 2011.  These same acquisitions accounted for $2.5 million of revenue for the three month period ended March 31, 2010 .





Our revenue from enterprise clients increased by $4.6 million , or 12.4% , to $42.2 million for the three month period ended March 31, 2011 from $37.6 million for the three month period ended March 31, 2010 , resulting from an increase in the number of enterprise clients and shipments executed and services provided. As we increased our number of transactional clients, our percentage of revenue from enterprise clients decreased to 33% of our revenue during the three month period ended March 31, 2011 from 42% for the three month period ended March 31, 2010 . As of March 31, 2011 , we had 154 enterprise clients under contract, which was an increase of 30 , compared to 124 enterprise clients under contract as of March 31, 2010 .





Our revenue from transactional clients increased by $35.7 million , or 69.2% , to $87.2 million for the three month period ended March 31, 2011 from $51.5 million for the three month period ended March 31, 2010 . The growth in revenue from transactional clients during this period was driven by the increase in the number of our transactional clients due to the increased productivity of transactional sales representatives and sales agents.  Our percentage of revenue from transactional clients increased to 67% of our revenue for the three month period ended March 31, 2011 from 58% of our revenue for the three month period ended March 31, 2010 . We served over 14,000 transactional clients in the three month period ended March 31, 2011 , an increase of approximately 4,000 compared to the 9,900 transactional clients served in the three month period ended March 31, 2010 .





Transportation costs





Our transportation costs increased by $31.8 million , or 44.2% , to $103.9 million for the three month period ended March 31, 2011 from $72.1 million for the three month period ended March 31, 2010 . The growth in the total number of shipments executed on behalf of our clients accounted for most of the increase in our transportation costs during this period. Our transportation costs as a percentage of revenue decreased to 80.3% for the three month period ended March 31, 2011 from


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80.9% for the three month period ended March 31, 2010 due to an increased number of less-than-truckload shipments in the composition of our sales volume.





Net revenue





Net revenue increased by $ 8.5 million , or 49.8% , to $25.5 million for the three month period ended March 31, 2011 from $17.0 million for the three month period ended March 31, 2010 . 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. The remaining increase in net revenue was the result of the $3.0 million generated from the acquisitions completed in 2010 and 2011. Net revenue margins increased to 19.7% for the three month period ended March 31, 2011 from 19.1% for the three month period ended March 31, 2010 . The increase in net revenue margins was the result of a higher mix of less-than-truckload revenue.





Operating expenses





Commission expense increased by $2.5 million , or 46.9% , to $7.7 million for the three month period ended March 31, 2011 from $5.2 million for the three month period ended March 31, 2010 . This increase is primarily attributable to the increase in net revenue.





General and administrative expenses increased by $3.1 million , or 32.9% , to $12.5 million for the three month period ended March 31, 2011 from $9.4 million for the three month period ended March 31, 2010 . The increase is primarily the result of hiring personnel to support our growth and increases in expenses associated with the growth of our business. As a percentage of net revenue, general and administrative expenses decreased to 48.8% for the three month period ended March 31, 2011 from 55.0% for the three month period ended March 31, 2010 . The decrease, as a percentage of net revenue, is primarily attributable to our ability to add clients in order to increase our revenue without the same corresponding increase in our general and administrative expenses.





Contingent consideration





The benefit recognized from contingent consideration decreased by $1.2 million, or 91.4%, to $0.1 million for the three month period ended March 31, 2011 from $1.3 million for the three month period ended March 31, 2010,  For the three month period ended March 31, 2011, the benefit primarily related to an increase in the contingent liability due to FMI of $0.3 million and a decrease in the contingent liability due to FLI of $0.4 million.  These adjustments were the result of changes to the forecasted financial performance of each acquisition.  For the three month period ended March 31, 2010, the benefit related to a decrease in the contingent liability of $0.6 million and $0.6 million due to RDS and FMI, respectively.  These adjustments were the result of changes to the forecasted financial performance of each acquisition.





Depreciation and amortization





Depreciation expense increased by $49,026 , or 5.3% , to $1.3 million for the three month period ended March 31, 2011 from $1.3 million for the three month period ended March 31, 2010 . The increase in depreciation expense is primarily attributable to purchases of computer hardware and software, equipment, furniture and fixtures, and the capitalization of internally developed software. Amortization expense increased by $0.2 million , or 47.4% , to $0.6 million for the three month period ended March 31, 2011 from $0.4 million for the three month period ended March 31, 2010 . The increase in amortization expense is the result of the intangibles acquired in acquisitions completed in 2010 and 2011.





Income from operations





Income from operations increased by $1.5 million , or 77.0% , to $3.5 million for the three month period ended March 31, 2011 from $2.0 million for the three month period ended March 31, 2010 . The increase in income from operations is attributable to the increase in net revenue in excess of the increase in operating expenses.





Other expense and income tax expense





Other expense decreased to $36,338 for the three month period ended March 31, 2011 from $49,716 for the three month period ended March 31, 2010 . The decrease is due to reduced interest costs related to capital leases in 2011 .





Income tax expense increased to $1.3 million for the three month period ended March 31, 2011 from $0.7 million for the three month period ended March 31, 2010 . Our effective tax rate decreased from approximately 37.5% for the three month period ended March 31, 2010 to 36.9% for the three month period ended March 31, 2011 .  The decrease in the effective tax rate


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was the result of the impact of elections regarding research and development tax credits taken in 2011.





Net Income





Net income increased by $1.0 million , or 81.3% , to $2.2 million for the three month period ended March 31, 2011 from $1.2 million for the three month period ended March 31, 2010 related to the items previously discussed.





Liquidity and Capital Resources





As of March 31, 2011 , we had $43.2 million in cash and cash equivalents, $64.8 million in working capital and $10.0 million available under our credit facility. On July 31, 2010, we amended the line of credit facility extending the expiration date to July 31, 2011.





Cash used in operating activities





For the three month period ended March 31, 2011 , $2.5 million of cash was provided by operating activities, representing  an increase of $4.0 million compared to the three month period ended March 31, 2010 . For the three month period ended March 31, 2011 , we generated $4.7 million in cash from net income, adjusted for non-cash operating items as compared to $2.6 million for the three month period ended March 31, 2010 .  For the three month periods ended March 31, 2011 and 2010 , this cash flow generation was offset by $2.2 million and $4.1 million, respectively, in changes to net working capital due to the growth of our business.





Cash used in investing activities





Cash used in investing activities was $2.9 million and $4.2 million during the three month periods ended March 31, 2011 and 2010 , respectively. The primary investing activities during these periods were acquisition related payments, the procurement of computer hardware and software and the internal development of computer software. During the three month period ended March 31, 2011 , we used $0.9 million for new acquisitions, and paid a $0.3 million earn-out payment to the former owners of Mountain Logistics.





Cash provided by (used in) financing activities





During the three month period ended March 31, 2011 , net cash provided by financing activities was $0.3 million compared to cash used in financing activities of $0.3 million for the three month period ended March 31, 2010 . This was primarily attributable to the exercise of employee stock options offset by a contingent consideration payment of $0.2 million.  For the three month period ended March 31, 2010 , the cash used in financing activities was primarily related to payment of initial public offering costs which occurred in the fourth quarter of 2009.





Credit facility





As of March 31, 2011 , 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, 2011.  We plan on extending the line of credit upon expiration.  Any outstanding borrowings are 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 2.25%. 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, 2011 , we were not in violation of any of these various 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 $2.7 million of potential earn-out payments in 2011 due in connection with our acquisitions. We currently expect to use up to $8.4 million for capital expenditures in 2011. In addition, we anticipate using up to $10.0 million through the end of 2011 to fund working capital requirements. We expect the use of cash for working capital purposes will be offset by the cash flow generated from operating


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earnings during this 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





Off-Balance Sheet Arrangements





We do not have any off-balance sheet arrangements.





Recent Accounting Pronouncements





In October 2009, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Codification ("ASC") Topic 605, Revenue Recognition . The guidance addresses the accounting for multiple-deliverable arrangements to enable vendors to account for products or services (deliverables) separately rather than as a combined unit. The guidance is effective prospectively for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010, with early adoption permitted. The adoption of did not have a material impact on our consolidated financial statements.


In January 2009, the Securities and Exchange Commission issued Release No. 33-9002, Interactive Data to Improve Financial Reporting . The rule requires all companies to provide their financial statements and financial statement schedules to the SEC and on their corporate websites in interactive data format using the eXtensible Business Reporting Language ("XBRL"), which is an electronic language specifically for the communication of business and financial data. The intention of XBRL is to improve its usefulness to users and to automate regulatory filings and business information processing. Interactive data has the potential to improve efficiencies and the analyses of financial disclosures by investors and other users. The Company is required to adopt this rule for the reporting period ended after June 15, 2011. The adoption of this rule will not have a material impact on our consolidated financial statements.


In January 2010, the FASB issued ASC 820, Fair Value Measurements and Disclosures . This guidance improves disclosures originally required under SFAS No. 157. ASU 2010-16 is effective for interim and annual periods beginning after December 15, 2009, except for the disclosures about purchases, sales, issuances and settlements in the roll forward of activity in Level 3 fair value measurements. Those disclosures are effective for fiscal years beginning after December 15, 2010, and for interim periods within those years. The adoption of this guidance did not have a material impact on our consolidated financial statements.


In December 2010, the FASB issued ASU 2010-29 to amend ASC 805, Business Combinations . The ASU amends certain existing and adds additional pro forma disclosure requirements for public enterprises (as defined by Topic 805). The guidance in ASU 2010-29 is effective for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2010 and must be applied on a prospective basis. The adoption of this guidance did not have a material impact on our consolidated 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 2.25%. 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.





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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, 2010 and 2011 .





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Item 4.   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, 2011 . 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. Disclosure controls and procedures include, without limitation, controls and procedures 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 accumulated and communicated to the company's management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. 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, 2011 , 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.





No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the quarter ended March 31, 2011 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.





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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.





In October 2010,  we filed a lawsuit against one of our former enterprise clients demanding payment of outstanding amounts due.  Management believes all billed amounts, approximately $2.7 million, are due and collectible and as such, the entire amount due is reflected in accounts receivable as of March 31, 2011 and the allowance for doubtful accounts has not been adjusted.  Concurrently, a lawsuit was filed by this client against us alleging damages of approximately $2.5 million.  Management believes this lawsuit is without merit and intends to vigorously dispute this claim.





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 ("Risk Factors") of our Annual Report on Form 10-K for the year ended December 31, 2010 .





Item 6.    Exhibits


Exhibit NoDescription of Exhibit31.1Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32.2Certification 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.





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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 5, 2011/s/ DOUGLAS R. WAGGONERBy:Douglas R. WaggonerChief Executive OfficerDate:May 5, 2011/s/ DAVID B. MENZELBy:David B. MenzelChief Financial Officer





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EXHIBIT INDEX


NumberDescription31.1Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32.2Certification 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.





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