Acquisitions
 9 Months Ended
Sep. 30, 2016
Business Combinations [Abstract]  
Acquisitions
Acquisitions

Command Transportation, LLC

On June 1, 2015, the Company completed the acquisition of all of the outstanding membership units of Command, one of the largest privately held truckload brokers and non-asset based transportation providers in the United States. Command was headquartered in Skokie, Illinois, with satellite locations in Texas, Missouri and Kansas. In October 2016, the majority of Command employees previously located in Skokie moved to the Company's headquarters in Chicago, Illinois.

The Company financed the cash purchase price for the Command acquisition, in part, with the proceeds from the issuance of shares of its common stock and Notes. The Company financed the remainder of the cash purchase price for the Command acquisition with drawings under the ABL Facility (as defined in Footnote 11). Additionally, a portion of the purchase price consisted of shares of Echo common stock issued to one of the sellers. The purchase price is reduced by a contingent consideration asset related to the retention of former Command employees. The acquisition date fair value of the total consideration transferred was $407.7 million:
Cash
$
394,279,778

Echo common stock, fair value
14,746,000

Contingent consideration, fair value
(1,176,417
)
Working capital adjustment, December 2015
(142,969
)
Total consideration transferred
$
407,706,392



The equity portion of the purchase price consisted of 503,829 unregistered shares of Echo common stock issued to Paul Loeb, the former owner of Command, on June 1, 2015. The closing price of Echo common stock on June 1, 2015 was $32.52 per share. As these shares were unregistered, the Company applied a 10% marketability discount to determine the fair value of the consideration transferred.


The following table summarizes the allocation of the total consideration transferred for the acquisition of Command:
Cash
$
9,495,246

Accounts receivable, net
62,398,350

Property and equipment
3,667,615

Prepaid expenses
818,903

Goodwill
225,304,568

Intangible assets
125,400,000

Total assets acquired
$
427,084,682

Accounts payable
$
11,172,240

Accrued expenses
8,206,050

Total liabilities assumed
$
19,378,290

Total consideration transferred
$
407,706,392


Goodwill of $225,304,568, which is approximately the amount of goodwill deductible for U.S. income tax purposes, represents the premium the Company paid over the fair value of the net tangible and identifiable intangible assets it acquired. The Company paid this premium because the acquisition of Command will, among other things, significantly enhance the Company's national scale and density in the highly fragmented truckload market. In addition, Echo paid this premium to acquire an experienced sales force with established customer and carrier relationships and Command executives with significant experience in the transportation industry.

During the first quarter of 2016, the Company adjusted the purchase price to recognize a $1.2 million contingent asset that may be due from the seller related to the retention of former Command employees. The fair value of the contingent asset at the acquisition date was determined based on the probability of the Company meeting certain employee retention criteria set forth in the purchase agreement. The Company recorded the current and noncurrent portions of the contingent asset to other current assets and other noncurrent assets, respectively, on the consolidated balance sheets. The Company will determine the fair value of the contingent asset each quarter based on the likelihood of meeting the employee retention criteria, and will record any change in fair value to selling, general and administrative expense in the consolidated statements of operations. The maximum amount the Company could have received under this agreement was $1.5 million. During the second quarter of 2016, the Company received $750,000 from the seller of Command after the Company met certain employee retention criteria set forth in the purchase agreement. The Company calculated the fair value of the contingent asset as of September 30, 2016 to be $395,392.

The fair values assigned to the intangible assets acquired were as follows:
Intangible Asset
Value
Useful Life
Customer relationships
$
97,200,000

17 years
Carrier relationships
18,300,000

17 years
Trade names
5,000,000

4 years
Noncompete agreements
4,900,000

5-8 years
 
$
125,400,000

 


The customer relationships are being amortized using an accelerated method, as an accelerated method best approximates the distribution of cash flows generated by the acquired customer relationships. The carrier relationships, trade names and noncompete agreements are being amortized using the straight-line method.

On June 1, 2015, the Company issued 335,882 shares of restricted common stock to 33 Command employees as employment inducement awards pursuant to NASDAQ Listing Rule 5635(c)(4). This restricted common stock vested on June 1, 2016 and was recognized as compensation expense over the vesting period. Additionally, at the closing, the Company issued 100,766 and 67,178 shares of restricted common stock and performance stock, respectively, to two of the sellers who entered into new employment agreements with the Company as employment inducement awards pursuant to NASDAQ Listing Rule 5635(c)(4). This restricted common stock and performance stock vests over 3 years and will be recognized as compensation expense over the vesting period. As of September 30, 2016, 33,588 and 33,589 shares of restricted common stock and performance stock, respectively, were outstanding. The stock compensation expense related to these issuances for the three and nine months ended September 30, 2016 was $0.3 million and $5.5 million, respectively. For the three and nine months ended September 30, 2015, the stock compensation expense related to these issuances was $3.1 million and $4.2 million.