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EX-32.1 - EX-32.1 - RADIANT LOGISTICS, INCrlgt-ex321_12.htm
EX-31.2 - EX-31.2 - RADIANT LOGISTICS, INCrlgt-ex312_9.htm
EX-31.1 - EX-31.1 - RADIANT LOGISTICS, INCrlgt-ex311_10.htm
EX-10.2 - EX-10.2 - RADIANT LOGISTICS, INCrlgt-ex102_89.htm
EX-10.1 - EX-10.1 - RADIANT LOGISTICS, INCrlgt-ex101_88.htm

 

 

 

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended December 31, 2016

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 001-35392

 

RADIANT LOGISTICS, INC.

(Exact name of Registrant as Specified in Its Charter)

 

 

Delaware

 

04-3625550

 

 

(State or Other Jurisdiction of

Incorporation or Organization)

 

(IRS Employer

Identification No.)

 

 

 

405 114th Ave S.E., Bellevue, WA 98004

 

 

(Address of principal executive offices)

 

 

 

 

 

(425) 943-4599

 

 

(Registrant’s telephone number, including area code)

 

 

 

 

 

N/A

 

(Former name, former address, and former fiscal year, if changed since last report)

 

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 past 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      No  

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer

 

  

 

Accelerated filer

 

 

 

 

 

 

Non-accelerated filer

 

  

  

 

Smaller reporting company

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  

There were 48,803,249 shares issued and outstanding of the registrant’s common stock, par value $.001 per share, as of February 1, 2017.

 

 

 

 

 


 

RADIANT LOGISTICS, INC.

TABLE OF CONTENTS

 

PART I. FINANCIAL INFORMATION

 

Item 1.

 

 

Condensed Consolidated Financial Statements - Unaudited

  

 

 

 

 

Condensed Consolidated Balance Sheets as of December 31, 2016 and June 30, 2016

  

3

 

 

 

Condensed Consolidated Statements of Operations and Other Comprehensive Income for the three and six months ended December 31, 2016 and 2015

  

4

 

 

 

Condensed Consolidated Statement of Stockholders’ Equity for the six months ended December 31, 2016

  

5

 

 

 

Condensed Consolidated Statements of Cash Flows for the six months ended December 31, 2016 and 2015

  

6

 

 

 

Notes to Condensed Consolidated Financial Statements

  

8

 

Item 2.

 

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

  

24

 

Item 3.

 

 

Quantitative and Qualitative Disclosures About Market Risk

  

36

 

Item 4.

 

 

Controls and Procedures

  

36

 

PART II. OTHER INFORMATION

  

 

 

Item 1.

 

 

Legal Proceedings

  

36

 

Item 1A.

 

 

Risk Factors

  

37

 

Item 6.

 

 

Exhibits

  

38

 

 

 

2


 

RADIANT LOGISTICS, INC.

Condensed Consolidated Balance Sheets

(unaudited)

 

(In thousands, except share and per share data)

 

December 31,

 

 

June 30,

 

 

 

2016

 

 

2016

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

8,263

 

 

$

4,768

 

Accounts receivable, net of allowance of $1,790 and $1,806, respectively

 

 

113,085

 

 

 

101,035

 

Employee and other receivables

 

 

338

 

 

 

635

 

Income tax deposit

 

 

616

 

 

 

1,525

 

Prepaid expenses and other current assets

 

 

2,414

 

 

 

5,410

 

Total current assets

 

 

124,716

 

 

 

113,373

 

 

 

 

 

 

 

 

 

 

Technology and equipment, net

 

 

12,653

 

 

 

12,453

 

 

 

 

 

 

 

 

 

 

Acquired intangibles, net

 

 

67,833

 

 

 

71,941

 

Goodwill

 

 

62,888

 

 

 

62,888

 

Deposits and other assets

 

 

2,780

 

 

 

2,814

 

Total long-term assets

 

 

133,501

 

 

 

137,643

 

Total assets

 

$

270,870

 

 

$

263,469

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable and accrued transportation costs

 

$

81,254

 

 

$

75,071

 

Commissions payable

 

 

13,223

 

 

 

8,280

 

Other accrued costs

 

 

4,054

 

 

 

5,331

 

Due to former shareholders of acquired operations

 

 

 

 

 

50

 

Current portion of notes payable

 

 

2,406

 

 

 

2,416

 

Current portion of contingent consideration

 

 

3,279

 

 

 

3,387

 

Current portion of transition and lease termination liability

 

 

1,571

 

 

 

1,838

 

Other current liabilities

 

 

106

 

 

 

138

 

Total current liabilities

 

 

105,893

 

 

 

96,511

 

 

 

 

 

 

 

 

 

 

Notes payable, net of current portion

 

 

26,058

 

 

 

28,903

 

Contingent consideration, net of current portion

 

 

1,391

 

 

 

4,098

 

Transition and lease termination liability, net of current portion

 

 

384

 

 

 

658

 

Deferred rent liability

 

 

902

 

 

 

851

 

Deferred tax liability

 

 

11,984

 

 

 

12,525

 

Other long-term liabilities

 

 

746

 

 

 

742

 

Total long-term liabilities

 

 

41,465

 

 

 

47,777

 

Total liabilities

 

 

147,358

 

 

 

144,288

 

 

 

 

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

 

 

Preferred stock, $0.001 par value, 5,000,000 shares authorized; 839,200 shares issued and

   outstanding, liquidation preference of $20,980

 

 

1

 

 

 

1

 

Common stock, $0.001 par value, 100,000,000 shares authorized; 48,893,755 and 48,857,506

   shares issued, and 48,801,957 and 48,857,506 shares outstanding, respectively

 

 

30

 

 

 

30

 

Additional paid-in capital

 

 

115,000

 

 

 

114,392

 

Treasury stock, at cost, 91,798 and 0 shares, respectively

 

 

(253

)

 

 

 

Deferred compensation

 

 

 

 

 

(1

)

Retained earnings

 

 

8,030

 

 

 

4,581

 

Accumulated other comprehensive income

 

 

638

 

 

 

98

 

Total Radiant Logistics, Inc. stockholders’ equity

 

 

123,446

 

 

 

119,101

 

Non-controlling interest

 

 

66

 

 

 

80

 

Total stockholders’ equity

 

 

123,512

 

 

 

119,181

 

Total liabilities and stockholders’ equity

 

$

270,870

 

 

$

263,469

 

 

The accompanying notes form an integral part of these condensed consolidated financial statements.

 

 

3


 

RADIANT LOGISTICS, INC.

Condensed Consolidated Statements of Operations and Comprehensive Income

(unaudited)

 

(In thousands, except share and per share data)

 

Three Months Ended December 31,

 

 

Six Months Ended December 31,

 

 

 

 

2016

 

 

 

2015

 

 

 

2016

 

 

 

2015

 

Revenues

 

$

198,881

 

 

$

206,322

 

 

$

394,014

 

 

$

421,817

 

Cost of transportation

 

 

148,757

 

 

 

158,726

 

 

 

294,881

 

 

 

323,508

 

Net revenues

 

 

50,124

 

 

 

47,596

 

 

 

99,133

 

 

 

98,309

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating partner commissions

 

 

22,957

 

 

 

21,691

 

 

 

46,308

 

 

 

43,989

 

Personnel costs

 

 

12,954

 

 

 

13,279

 

 

 

25,732

 

 

 

27,722

 

Selling, general and administrative expenses

 

 

5,569

 

 

 

6,629

 

 

 

11,350

 

 

 

13,092

 

Depreciation and amortization

 

 

3,028

 

 

 

3,119

 

 

 

6,034

 

 

 

6,224

 

Transition and lease termination costs

 

 

385

 

 

 

1,157

 

 

 

862

 

 

 

4,320

 

Impairment of acquired intangible assets

 

 

 

 

 

3,680

 

 

 

 

 

 

3,680

 

Change in contingent consideration

 

 

806

 

 

 

598

 

 

 

1,056

 

 

 

186

 

Total operating expenses

 

 

45,699

 

 

 

50,153

 

 

 

91,342

 

 

 

99,213

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from operations

 

 

4,425

 

 

 

(2,557

)

 

 

7,791

 

 

 

(904

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

6

 

 

 

8

 

 

 

11

 

 

 

14

 

Interest expense

 

 

(620

)

 

 

(1,318

)

 

 

(1,259

)

 

 

(2,735

)

Foreign exchange gain

 

 

188

 

 

 

218

 

 

 

388

 

 

 

469

 

Other

 

 

116

 

 

 

24

 

 

 

310

 

 

 

119

 

Total other expense:

 

 

(310

)

 

 

(1,068

)

 

 

(550

)

 

 

(2,133

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) before income tax expense

 

 

4,115

 

 

 

(3,625

)

 

 

7,241

 

 

 

(3,037

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income tax benefit (expense)

 

 

(1,489

)

 

 

1,628

 

 

 

(2,741

)

 

 

1,394

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

 

2,626

 

 

 

(1,997

)

 

 

4,500

 

 

 

(1,643

)

Less: Net income attributable to non-controlling interest

 

 

(16

)

 

 

(19

)

 

 

(28

)

 

 

(34

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) attributable to Radiant Logistics, Inc.

 

 

2,610

 

 

 

(2,016

)

 

 

4,472

 

 

 

(1,677

)

Less: Preferred stock dividends

 

 

(511

)

 

 

(511

)

 

 

(1,023

)

 

 

(1,023

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) attributable to common stockholders

 

$

2,099

 

 

$

(2,527

)

 

$

3,449

 

 

$

(2,700

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation gain

 

 

317

 

 

 

566

 

 

 

540

 

 

 

1,422

 

Comprehensive income (loss)

 

$

2,416

 

 

$

(1,961

)

 

$

3,989

 

 

$

(1,278

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) per common share - basic and diluted

 

$

0.04

 

 

$

(0.05

)

 

$

0.07

 

 

$

(0.06

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic shares

 

 

48,789,684

 

 

 

48,732,762

 

 

 

48,825,598

 

 

 

48,054,100

 

Diluted shares

 

 

49,799,686

 

 

 

48,732,762

 

 

 

49,667,041

 

 

 

48,054,100

 

 

The accompanying notes form an integral part of these condensed consolidated financial statements.

4


 

 

RADIANT LOGISTICS, INC.

Condensed Consolidated Statement of Stockholders’ Equity

(unaudited)

 

 

RADIANT LOGISTICS, INC. STOCKHOLDERS' EQUITY

 

 

 

 

 

(In thousands, except share data)

Preferred Stock

 

 

Common Stock

 

 

Additional

Paid-in

 

 

Treasury

 

 

Deferred

 

 

Retained

 

 

Accumulated Other

Comprehensive

 

 

Non-

Controlling

 

 

Total

Stockholders’

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Stock

 

 

Compensation

 

 

Earnings

 

 

Income

 

 

Interest

 

 

Equity

 

Balance as of June 30, 2016

 

839,200

 

 

$

1

 

 

 

48,857,506

 

 

$

30

 

 

$

114,392

 

 

$

 

 

$

(1

)

 

$

4,581

 

 

$

98

 

 

$

80

 

 

$

119,181

 

Repurchase of common

   stock

 

 

 

 

 

 

 

(91,798

)

 

 

 

 

 

 

 

 

 

(253

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(253

)

Share-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

659

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

659

 

Amortization of deferred

   compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1

 

 

 

 

 

 

 

 

 

 

 

 

1

 

Cashless exercise of stock

   options

 

 

 

 

 

 

 

36,249

 

 

 

 

 

 

(51

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(51

)

Preferred dividends paid

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,023

)

 

 

 

 

 

 

 

 

(1,023

)

Distribution to non-

   controlling interest

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(42

)

 

 

(42

)

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4,472

 

 

 

 

 

 

28

 

 

 

4,500

 

Comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

540

 

 

 

 

 

 

540

 

Balance as of December 31, 2016

 

839,200

 

 

$

1

 

 

 

48,801,957

 

 

$

30

 

 

$

115,000

 

 

$

(253

)

 

$

 

 

$

8,030

 

 

$

638

 

 

$

66

 

 

$

123,512

 

 

The accompanying notes form an integral part of these condensed consolidated financial statements.

 

 

5


 

RADIANT LOGISTICS, INC.

Condensed Consolidated Statements of Cash Flows

(unaudited)

 

(In thousands)

 

Six Months Ended December 31,

 

 

 

 

2016

 

 

 

2015

 

CASH FLOWS PROVIDED BY OPERATING ACTIVITIES

 

 

 

 

 

 

 

 

Net income (loss)

 

$

4,500

 

 

$

(1,643

)

ADJUSTMENTS TO RECONCILE NET INCOME (LOSS) TO NET CASH PROVIDED BY OPERATING ACTIVITIES

 

 

 

 

 

 

 

 

share-based compensation expense

 

 

660

 

 

 

758

 

amortization of intangibles

 

 

4,157

 

 

 

4,412

 

depreciation and leasehold amortization

 

 

1,877

 

 

 

1,812

 

deferred income tax benefit

 

 

(658

)

 

 

(2,307

)

amortization of loan fees

 

 

159

 

 

 

201

 

change in contingent consideration

 

 

1,056

 

 

 

186

 

loss on impairment of acquired intangible assets

 

 

 

 

 

3,680

 

transition and lease termination costs

 

 

44

 

 

 

2,942

 

loss on disposal of technology and equipment

 

 

4

 

 

 

111

 

change in (recovery of) provision for doubtful accounts

 

 

(17

)

 

 

268

 

CHANGE IN OPERATING ASSETS AND LIABILITIES:

 

 

 

 

 

 

 

 

accounts receivable

 

 

(12,586

)

 

 

17,485

 

employee and other receivables

 

 

297

 

 

 

(13

)

income tax deposit

 

 

939

 

 

 

(2,569

)

prepaid expenses, deposits and other assets

 

 

2,912

 

 

 

2,502

 

accounts payable and accrued transportation costs

 

 

6,592

 

 

 

(10,900

)

commissions payable

 

 

4,944

 

 

 

2,055

 

other accrued costs

 

 

(1,248

)

 

 

(2,270

)

other liabilities

 

 

2

 

 

 

(137

)

deferred rent liability

 

 

57

 

 

 

(206

)

payment of contingent consideration

 

 

(425

)

 

 

(15

)

transition and lease termination liability

 

 

(530

)

 

 

(682

)

Net cash provided by operating activities

 

 

12,736

 

 

 

15,670

 

 

 

 

 

 

 

 

 

 

CASH FLOWS USED FOR INVESTING ACTIVITIES:

 

 

 

 

 

 

 

 

Acquisition during the fiscal year

 

 

(50

)

 

 

(800

)

Purchases of technology and equipment

 

 

(2,184

)

 

 

(2,396

)

Proceeds from sale of technology and equipment

 

 

52

 

 

 

152

 

Payments to former shareholders of acquired operations

 

 

(50

)

 

 

(684

)

Net cash used for investing activities

 

 

(2,232

)

 

 

(3,728

)

 

 

 

 

 

 

 

 

 

CASH FLOWS PROVIDED BY (USED FOR) FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

Repayments to credit facility, net of credit fees

 

 

(979

)

 

 

(34,706

)

Repayments of notes payable

 

 

(1,166

)

 

 

(85

)

Proceeds from stock offering, net of offering costs

 

 

 

 

 

38,430

 

Purchases of treasury stock

 

 

(253

)

 

 

 

Payments of contingent consideration

 

 

(3,446

)

 

 

(1,454

)

Payment of preferred stock dividends

 

 

(1,023

)

 

 

(1,023

)

Distribution to non-controlling interest

 

 

(42

)

 

 

(48

)

Payments of employee tax withholdings related to cashless stock option exercises

 

 

(51

)

 

 

(104

)

Tax benefit from exercise of stock options

 

 

 

 

 

60

 

Net cash provided by (used for) financing activities

 

 

(6,960

)

 

 

1,070

 

 

 

 

 

 

 

 

 

 

Effect of exchange rate changes on cash and cash equivalents

 

 

(49

)

 

 

(154

)

 

 

 

 

 

 

 

 

 

NET INCREASE IN CASH AND CASH EQUIVALENTS

 

 

3,495

 

 

 

12,858

 

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD

 

 

4,768

 

 

 

7,268

 

 

 

 

 

 

 

 

 

 

CASH AND CASH EQUIVALENTS, END OF PERIOD

 

$

8,263

 

 

$

20,126

 

 

 

 

 

 

 

 

 

 

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

 

 

 

 

 

 

 

 

Income taxes paid

 

$

2,503

 

 

$

2,058

 

Interest paid

 

$

1,112

 

 

$

2,622

 

 

(continued)

6


 

RADIANT LOGISTICS, INC.

Condensed Consolidated Statements of Cash Flows (continued)

(unaudited)

Supplemental disclosure of non-cash investing and financing activities:

In December 2015, the Company issued 7,385 shares of common stock at a fair value of $4.23 per share in satisfaction of $31 of the Copper Logistics, Incorporated purchase price, resulting in an increase to common stock and an increase to additional paid-in capital of $31.

 

The accompanying notes form an integral part of these condensed consolidated financial statements.


7


 

RADIANT LOGISTICS, INC.

Notes to the Condensed Consolidated Financial Statements

(unaudited)

(All amounts in these footnotes other than share amounts and per share amounts are in thousands)

 

NOTE 1 – THE COMPANY AND BASIS OF PRESENTATION

The Company

Radiant Logistics, Inc. (the “Company”) operates as a third party logistics company, providing multi-modal transportation and logistics services primarily in the United States and Canada. The Company services a large and diversified account base consisting of consumer goods, food and beverage, manufacturing and retail customers which it supports from an extensive network of over 100 operating locations across North America, as well as an integrated international service partner network located in other key markets around the globe. The Company provides these services through a multi-brand network including 18 Company-owned offices. As a third party logistics company, the Company has approximately 10,000 asset-based transportation companies, including motor carriers, railroads, airlines and ocean lines, in its carrier network. The Company believes shippers value its services because it is able to objectively arrange the most efficient and cost-effective means, type and provider of transportation service since it is not influenced by the ownership of transportation assets. In addition, the Company’s minimal investment in physical assets affords it the opportunity for higher return on invested capital and net cash flows than the Company’s asset-based competitors.

Through its operating locations across North America, the Company offers domestic and international air and ocean freight forwarding services and freight brokerage services including truckload services, less than truckload services and intermodal services, which is the movement of freight in trailers or containers by combination of truck and rail. The Company’s primary business operations involve arranging the shipment, on behalf of its customers, of materials, products, equipment and other goods that are generally larger than shipments handled by integrated carriers of primarily small parcels, such as FedEx, DHL and UPS, including arranging and monitoring all aspects of material flow activity utilizing advanced information technology systems. The Company also provides other value-added logistics services, including customs brokerage, order fulfillment, inventory management and warehousing services to complement its core transportation service offering.

The Company expects to grow its business organically and by completing acquisitions of other companies with complementary geographical and logistics service offerings. The Company’s organic growth strategy will continue to focus on strengthening existing and expanding new customer relationships leveraging the benefit of the Company’s new truck brokerage and intermodal service offerings, while continuing its efforts on the organic build-out of the Company’s network of strategic operating partner locations. In addition, as the Company continues to grow and scale its business, the Company is creating density in its trade lanes which creates opportunities for the Company to more efficiently source and manage its transportation capacity.

In addition to its focus on organic growth, the Company will continue to search for acquisition candidates that bring critical mass from a geographic and purchasing power standpoint, along with providing complementary service offerings to the current platform. As the Company continues to grow and scale its business, it remains focused on leveraging its back-office infrastructure and technology systems to drive productivity improvement across the organization.

Interim Disclosure

The condensed consolidated financial statements included herein have been prepared, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to such rules and regulations. The Company’s management believes that the disclosures are adequate to make the information presented not misleading. These condensed financial statements should be read in conjunction with the financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended June 30, 2016.

The interim period information included in this Quarterly Report on Form 10-Q reflects all adjustments, consisting of normal recurring adjustments, that are, in the opinion of the Company’s management, necessary for a fair statement of the results of the respective interim periods. Results of operations for interim periods are not necessarily indicative of results to be expected for an entire year.

Basis of Presentation

The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries as well as a single variable interest entity, Radiant Logistics Partners, LLC (“RLP”), which is 40% owned by Radiant Global Logistics, Inc. (“RGL”), and 60% owned by Radiant Capital Partners, LLC (“RCP”, see Note 8), an affiliate of Bohn H. Crain, the Company’s Chief Executive Officer, whose accounts are included in the condensed consolidated financial statements. All significant intercompany balances and transactions have been eliminated. All amounts in the condensed consolidated financial statements are stated in thousands, except share and per share amounts.

 

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NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a)

Use of Estimates

The preparation of financial statements and related disclosures in accordance with accounting principles generally accepted in the United States (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Such estimates include revenue recognition, accruals for the cost of purchased transportation, the fair value of acquired assets and liabilities, changes in contingent consideration, accounting for the issuance of shares and share-based compensation, the assessment of the recoverability of long-lived assets and goodwill, and the establishment of an allowance for doubtful accounts. Estimates and assumptions are reviewed periodically and the effects of revisions are reflected in the period that they are determined to be necessary. Actual results could differ from those estimates.

b)

Fair Value Measurements

In general, fair values determined by Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities. Fair values determined by Level 2 inputs utilize observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities. Fair values determined by Level 3 inputs are unobservable data points for the asset or liability, and include situations where there is little, if any, market activity for the asset or liability.

c)

Fair Value of Financial Instruments

The carrying values of the Company’s receivables, accounts payable and accrued transportation costs, commissions payable, other accrued costs, and the income tax deposit approximate the fair values due to the relatively short maturities of these instruments. The carrying value of the Company’s credit facility and other long-term liabilities would not differ significantly from fair value (based on Level 2 inputs) if recalculated based on current interest rates. Contingent consideration attributable to the Company’s acquisitions are reported at fair value using Level 3 inputs.

d)

Cash and Cash Equivalents

For purposes of the statements of cash flows, cash equivalents include all highly liquid investments with original maturities of three months or less that are not securing any corporate obligations. Cash balances may at times exceed federally insured limits. Checks issued by the Company that have not yet been presented to the bank for payment are reported as accounts payable and commissions payable in the accompanying condensed consolidated balance sheets. Accounts payable and commissions payable includes outstanding payments which had not yet been presented to the bank for payment in the amounts of $10,615 and $4,434 as of December 31, 2016 and June 30, 2016, respectively.

e)

Concentrations

The Company maintains its cash in bank deposit accounts that, at times, may exceed federally-insured limits. The Company has not experienced any losses in such accounts.

f)

Accounts Receivable

The Company’s receivables are recorded when billed and represent claims against third parties that will be settled in cash. The carrying value of the Company’s receivables, net of the allowance for doubtful accounts, represents their estimated net realizable value. The Company evaluates the collectability of accounts receivable on a customer-by-customer basis. The Company records a reserve for bad debts against amounts due in order to reduce the net recognized receivable to an amount the Company believes will be reasonably collected. The reserve is a discretionary amount determined from the analysis of the aging of the accounts receivables, historical experience and knowledge of specific customers.

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The Company derives a substantial portion of its revenue through independently-owned strategic operating partner locations operating under various Company brands. Each individual strategic operating partner is responsible for some or all of the bad debt expense related to the underlying customers being serviced by such operating partner. To facilitate this arrangement, certain strategic operating partners are required to maintain a security deposit with the Company that is recognized as a liability in the Company’s financial statements. The Company charges each individual strategic operating partner’s bad debt reserve account for any accounts receivable aged beyond 90 days. However, the bad debt reserve account may carry a deficit balance when amounts charged to this reserve exceed amounts otherwise available in the bad debt reserve account. In these circumstances, deficit bad debt reserve accounts, as well as other deficit balances owed to us by our strategic operating partners, are recognized as a receivable in the Company’s financial statements. Other strategic operating partners are not responsible to establish a bad debt reserve, however, they are still responsible for deficits and their strategic operating partner agreements provide that the Company may withhold all or a portion of future commission checks payable to the individual strategic operating partner in satisfaction of any deficit balance. Currently, a number of the Company’s strategic operating partners have a deficit balance in their bad debt reserve account. The Company expects to replenish these funds through the future business operations of these strategic operating partners. However, to the extent any of these operating partners were to cease operations or otherwise be unable to replenish these deficit accounts, the Company would be at risk of loss for any such amount.

g)

Technology and Equipment

Technology (computer software, hardware, and communications), vehicles, furniture and equipment are stated at cost, less accumulated depreciation over the estimated useful lives of the respective assets. Depreciation is computed using three to fifteen year lives for vehicles, communication, office, furniture, and computer equipment using the straight line method of depreciation. Computer software is depreciated over a three to five year life using the straight line method of depreciation. For leasehold improvements, the cost is amortized over the shorter of the lease term or useful life on a straight line basis. Upon retirement or other disposition of these assets, the cost and related accumulated depreciation or amortization are removed from the accounts and the resulting gain or loss, if any, is reflected in other income or expense. Expenditures for maintenance, repairs and renewals of minor items are charged to expense as incurred. Major renewals and improvements are capitalized.

h)

Goodwill

Goodwill represents the excess of purchase price over the value assigned to the net tangible and identifiable intangible assets of a business acquired. The Company typically performs its annual goodwill impairment test effective as of April 1 of each year, unless events or circumstances indicate impairment may have occurred before that time. The Company assesses qualitative factors to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying amount. After assessing qualitative factors, the Company determined that no further testing was necessary. If further testing was necessary, the Company would have performed a two-step impairment test for goodwill. The first step requires the Company to determine the fair value of each reporting unit, and compare the fair value to the reporting unit’s carrying amount. To the extent a reporting unit’s carrying amount exceeds its fair value, an indication exists that the reporting unit’s goodwill may be impaired and the Company must perform a second more detailed impairment assessment. The second impairment assessment involves allocating the reporting unit’s fair value to all of its recognized and unrecognized assets and liabilities in order to determine the implied fair value of the reporting unit’s goodwill as of the assessment date. The implied fair value of the reporting unit’s goodwill is then compared to the carrying amount of goodwill to quantify an impairment charge as of the assessment date. As of December 31, 2016, management believes there are no indications of impairment.

i)

Long-Lived Assets

Acquired intangibles consist of customer related intangibles, trade names and trademarks, and non-compete agreements arising from the Company’s acquisitions. Customer related intangibles are amortized using the straight-line method over a period of up to 10 years, trademarks and trade names are amortized using the straight line method over 15 years, and non-compete agreements are amortized using the straight line method over the term of the underlying agreements.

The Company reviews long-lived assets to be held-and-used for impairment whenever events or changes in circumstances indicate the carrying amount of the assets may not be recoverable. If the sum of the undiscounted expected future cash flows over the remaining useful life of a long-lived asset is less than its carrying amount, the asset is considered to be impaired. Impairment losses are measured as the amount by which the carrying amount of the asset exceeds the fair value of the asset. When fair values are not available, the Company estimates fair value using the expected future cash flows discounted at a rate commensurate with the risks associated with the recovery of the asset. Assets to be disposed of are reported at the lower of carrying amount or fair value less costs to sell. Management has performed a review of all long-lived assets and has determined no impairment of the respective carrying value has occurred as of December 31, 2016.

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j)

Business Combinations

The Company accounts for business combinations using the purchase method of accounting and allocates the purchase price to the tangible and intangible assets acquired and the liabilities assumed based upon their estimated fair values at the acquisition date. The difference between the purchase price and the fair value of the net assets acquired is recorded as goodwill. While the Company uses its best estimates and assumptions to accurately value assets acquired and liabilities assumed at the acquisition date, the estimates are inherently uncertain and subject to refinement. As a result, during the measurement period, which may be up to one year from the acquisition date, the Company records adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill. Upon the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded in the condensed consolidated statements of operations.

The fair values of intangible assets acquired are estimated using a discounted cash flow approach with Level 3 inputs. Under this method, an intangible asset’s fair value is equal to the present value of the incremental after-tax cash flows (excess earnings) attributable solely to the intangible asset over its remaining useful life. To calculate fair value, the Company uses risk-adjusted cash flows discounted at rates considered appropriate given the inherent risks associated with each type of asset. The Company believes the level and timing of cash flows appropriately reflects market participant assumptions.

The Company determines the acquisition date fair value of the contingent consideration payable based on the likelihood of paying the contingent consideration as part of the consideration transferred. The fair value is estimated using projected future operating results and the corresponding future earn-out payments that can be earned upon the achievement of specified operating objectives and financial results by acquired companies using Level 3 inputs and the amounts are then discounted to present value. These liabilities are measured quarterly at fair value, and any change in the contingent liability is included in the condensed consolidated statements of operations.

k)

Commitments

The Company has operating lease commitments for equipment rentals, office space, and warehouse space under non-cancelable operating leases expiring at various dates through March 2022. Rent expense is recognized straight line over the term of the lease. Minimum future lease payments (excluding the lease payments included in the lease termination liability) under these non-cancelable operating leases for each of the next five fiscal years ending June 30 and thereafter are as follows:

 

(In thousands)

 

 

 

2017 (remaining portion)

$

2,323

 

2018

 

4,219

 

2019

 

3,643

 

2020

 

3,270

 

2021

 

2,295

 

Thereafter

 

979

 

 

 

 

 

Total minimum lease payments

$

16,729

 

 

Rent expense amounted to $1,178 and $2,395 for the three and six months ended December 31, 2016, respectively, and $1,194 and $2,422 for the three and six months ended December 31, 2015, respectively

l)

Lease Termination and Transition Costs

Lease termination costs consist of expenses related to future rent payments for which the Company no longer intends to receive any economic benefit. A liability is recorded when the Company ceases to use leased space. Lease termination costs are calculated as the present value of lease payments, net of expected sublease income, and the loss on disposition of assets. Transition costs consist of non-recurring personnel costs that will be eliminated in connection with the winding-down of the historical back-office of Service by Air, Inc. (“SBA”) and other operating locations.

The transition and lease termination liability consists of the following:

 

(In thousands)

Lease Termination

Costs

 

 

Retention and

Severance Costs

 

 

Non-recurring

Personnel Costs

 

 

Total

 

Balance as of June 30, 2016

$

1,815

 

 

$

681

 

 

$

 

 

$

2,496

 

Lease termination and transitions costs