FOR MORE INFORMATION, PLEASE VISIT:
http://investor.radiantdelivers.com
It’s the Network that Delivers! ®
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2012
A N N U A L R E P O R T
To Our Shareholders:
This past year represented another year of notable progress for
Radiant highlighted by our 2012 up-listing to the NYSE Marketplace
and bell-ringing ceremony. Ringing the bell on the floor of the New
York Stock Exchange was a special milestone for the Company as it
gave us, not only the opportunity to pause and celebrate our success
to date, but also the opportunity to acknowledge our appreciation
for the support of our customers, operating partners, carriers,
shareholders and the hard-working employees that have come
together to make Radiant the great organization that it is today.
The key to our success rests in the nature of our scalable, non-asset
based business model and the compelling value proposition that
we bring to the marketplace. Our focus and commitment remains
on providing value to the agent-based forwarding community by:
leveraging our status as a public company to provide our partners
with an opportunity to share in the value that they help create;
providing a robust platform that translates into better purchasing
power with our vendors and more sophisticated technology solutions
for our customers; and offering a unique opportunity in terms of
succession planning and liquidity for our station owners. Many of
our station owners are also shareholders and we were proud to
represent them on the floor of the NYSE Exchange this summer.
Over this past year, we also made good progress on the integration
of Distribution By Air and completed two additional strategic
transactions; acquiring Isla International in Laredo, Texas (December
2011) in support of the expanding U.S-Mexico trade and acquiring
ALBS (February 2012) at New York/JFK to further strengthen our
international capabilities in the northeast.
Even without a full year’s benefit of our most recent acquisitions
in Laredo and New York/JFK, for our year ended June 30, 2012 we
continued our trend of profitable growth posting record results
with revenues of $297.0 million, an improvement of $93.2 million
or 45.7%; net revenues of $84.7 million, and improvement of
$22.2 million or 35.5%; and adjusted EBITDA of $9.2 million, an
improvement of $1.6 million or 22.3% over the comparable prior
year period.
We have certainly come a long way since our launch back in 2006
and yet we feel there is tremendous opportunity ahead. The
foundation has been laid – in people, process and technology - and
we are looking forward to continuing to build on this great platform
to bring value to our shareholders, our operating partners and the
end customers that we serve. Radiant Logistics – It’s the Network
that Delivers!®
Sincerely,
Bohn H. Crain
Founder, Chairman and CEO
Board of Directors, management and guests of Radiant Logistics, Inc. at the Opening Bell Ringing
Ceremony on the floor of the New York Stock Exchange on July 6, 2012.
O U R B R A N D S
Gross Revenue
(millions)
2008
2009
2010
2011
2012
300
200
100
0.0
297.0
203.8
137.0
146.7
100.2
Net Revenue
(millions)
2008
2009
2010
2011
2012
100
75
50
25
0.0
84.7
62.5
45.6
45.6
35.8
Adjusted EBITDA(1)
(millions)
2008
2009
2010
2011
2012
9.1(3)
7.4(2)
3.7
4.2
1.8
10
7.5
5.0
2.5
0.0
(1) Reflects a non-GAAP measure of income management considers useful in analyzing our
results. A reconciliation of our non-GAAP financial measures presented to our GAAP-based
net income, as well as a description of our non-GAAP measures, is included on the last
page of this Annual Report. Our non-GAAP measures are not intended to replace any
presentation included in our consolidated financial statements.
(2) Excludes $583,000 in non-recurring transition costs for acquisitions.
(3) Excludes $1,536,000 in non-recurring transition costs for acquisitions and other legal costs.
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the fiscal year ended June 30, 2012
[ ] 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 000-50283
RADIANT LOGISTICS, INC.
(Exact name of Registrant as Specified in Its Charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
04-3625550
(IRS Employer Identification Number)
405 114 th Avenue S.E., Third Floor
Bellevue, WA 98004
(Address of Principal Executive Offices)
(425) 943-4599
Registrant’s Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
Common Stock, $.001 Par Value
Name of Exchange on which Registered
NYSE MKT
Securities registered under Section 12(g) of the Exchange Act:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in rule 405 of the Securities Act.
Yes (cid:1) No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the
Exchange Act. (cid:1)
Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the
Exchange Act 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 (cid:1)
Indicate by check mark if the disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained
herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this form 10-K. (cid:1)
PH2 1076319v1 10/03/12
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 (cid:1)
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 (cid:1)
Non-accelerated filer (cid:1)
Accelerated filer (cid:1)
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 (cid:1) No
The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant
based on the closing share price of the registrant's common stock on December 30, 2011 as reported on the OTC QB
was $47,614,322. Shares of common stock held by each current executive officer and director and by each person
who is known by the registrant to own 5% or more of the outstanding common stock have been excluded from this
computation in that such persons may be deemed to be affiliates of the registrant. This determination of affiliate
status is not a conclusive determination for other purposes.
As of September 20, 2012, 33,041,430 shares of the registrant's common stock were outstanding.
Documents Incorporated by Reference: Portions of the registrant’s proxy statement for the 2012 Annual Meeting of
Stockholders are incorporated herein by reference in Part III of this Annual Report on Form 10-K. Such proxy
statement will be filed with the Securities and Exchange Commission within 120 days of the registrant’s fiscal year
ended June 30, 2012.
PH2 1076319v1 10/03/12
TABLE OF CONTENTS
PART I
ITEM 1
ITEM 1A
ITEM 1B
ITEM 2
ITEM 3
ITEM 4
BUSINESS
RISK FACTORS
UNRESOLVED STAFF COMMENTS
PROPERTIES
LEGAL PROCEEDINGS
MINE SAFETY DISCLOSURES
PART II
ITEM 5
ITEM 6
ITEM 7
ITEM 7A
ITEM 8
ITEM 9
ITEM 9A
ITEM 9B
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER
MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
SELECTED FINANCIAL DATA
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURES
CONTROLS AND PROCEDURES
OTHER INFORMATION
PART III
ITEM 10
ITEM 11
ITEM 12
ITEM 13
ITEM 14
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
EXECUTIVE COMPENSATION
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS, AND
MANAGEMENT AND RELATED STOCKHOLDER MATTERS
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
PRINCIPAL ACCOUNTANT FEES AND SERVICES
ITEM 15
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
PART IV
Signatures
Financial Statements
2
7
16
17
17
17
18
19
19
30
30
30
30
31
31
33
33
33
33
33
37
F-1
PH2 1076319v1 10/03/12
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[This page intentionally left blank.]
CAUTIONARY STATEMENT ABOUT FORWARD-LOOKING STATEMENTS
Cautionary Statement for Forward-Looking Statements
This report includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended, regarding future operating
performance, events, trends and plans. All statements other than statements of historical fact contained herein,
including, without limitation, statements regarding our future financial position, business strategy, budgets,
projected revenues and costs, and plans and objectives of management for future operations, are forward-looking
statements. Forward-looking statements generally can be identified by the use of forward-looking terminology such
as "may," "will," "expects," "intends," "plans," "projects," "estimates," "anticipates," or "believes" or the negative
thereof or any variation thereon or similar terminology or expressions. We have based these forward-looking
statements on our current expectations and projections about future events. These forward-looking statements are
not guarantees and are subject to known and unknown risks, uncertainties and assumptions about us that may cause
our actual results, levels of activity, performance or achievements to be materially different from any future results,
levels of activity, performance or achievements expressed or implied by such forward-looking statements. While it
is impossible to identify all of the factors that may cause our actual operating performance, events, trends or plans to
differ materially from those set forth in such forward-looking statements, such factors include the inherent risks
associated with our ability to: (i) use our current infrastructure as a "platform" upon which we can build a profitable
global transportation and supply chain management company; (ii) retain and build upon the relationships we have
with our independent agents; (iii) continue growing our business and maintain historical or increased gross profit
margins; (iv) locate suitable acquisition opportunities and secure the financing necessary to complete such
acquisitions; (v) assess and respond to competitive practices in our industry; (vi) mitigate, to the best extent possible,
our dependence on current management and certain of our larger agency locations; (vii) assess and respond to the
impact of current and future laws and governmental regulations affecting the transportation industry in general and
our operations in particular; and (viii) assess and respond to such other factors that may be identified from time to
time in our Securities and Exchange Commission ("SEC") filings and other public announcements including those
set forth below under the caption “Risk Factors” in Part 1 Item 1A of this report. All subsequent written and oral
forward-looking statements attributable to us, or persons acting on our behalf, are expressly qualified in their
entirety by the foregoing. Readers are cautioned not to place undue reliance on our forward-looking statements, as
they speak only as of the date made. Except as required by law, we assume no duty to update or revise our forward-
looking statements.
PH2 1076319v1 10/03/12
1
ITEM 1. BUSINESS
The Company
PART I
Radiant Logistics, Inc. (the "Company," "we" or "us") is a non-asset based transportation and logistics services
company providing customers domestic and international freight forwarding services through a network of
Company-owned and independent agent offices operating under the Radiant, Airgroup, Adcom and DBA brands.
We also offer an expanding array of value added supply chain management services, including customs and property
brokerage, order fulfillment, inventory management and warehousing.
Since inception of our business in 2006, we have executed on a strategy to expand operations through a combination
of organic growth and the strategic acquisition of non-asset based transportation and logistics providers meeting our
acquisition criteria.
Our first acquisition of Airgroup Corporation ("Airgroup") was completed on January 1, 2006. Airgroup, located in
Bellevue, Washington, is a non-asset based logistics company providing domestic and international freight
forwarding services around the world through a network of company and agent offices.
In connection with our 2008 acquisition of Adcom, we changed the name of Airgroup Corporation to Radiant
Global Logistics, Inc. ("RGL") to better position our centralized back-office operations to service our multi-brand
network. Today, RGL, through the Radiant, Airgroup, Adcom and DBA network brands, has a diversified account
base including manufacturers, distributors and retailers using a network of independent carriers through a
combination of strategically positioned, company owned and independent agent offices.
Our growth strategy will continue to focus on both organic growth and growth through acquisitions. For organic
growth, the Company will focus on strengthening and retaining existing, and expanding new agency relationships.
We have focused our efforts on the build-out of our network of agent locations, as well as enhancing our back-office
infrastructure, transportation and accounting systems.
In addition to our focus on organic growth, we are executing our acquisition strategy to develop additional growth
opportunities. The Company has adopted its acquisition strategy to, among others, secure greater efficiencies in its
ability to acquire purchased transportation, as well as to gain enhanced yield through revenue and cost synergies.
This in turn provides a greater value proposition to the agents on which we depend. The success of the Company’s
acquisition strategy depends upon a number of factors, including its ability to: (i) identify and acquire target
businesses that fit within its acquisition criteria; (ii) continue to secure adequate funding to finance identified
acquisition opportunities; (iii) efficiently integrate the businesses of the companies acquired; (iv) generate the
anticipated economies of scale from the integration; and (v) maintain the historic sales growth of the acquired
businesses in order to generate organic growth from the acquired business. There are a variety of risks associated
with our ability to achieve our strategic objectives, including the ability to acquire and profitably manage additional
businesses and the intense competition in the industry for customers and for acquisition candidates. Certain of these
business risks are identified or referred to below in Item 1A of this Report.
The Company will continue to search for targets that fit within its acquisition criteria. Our ability to continue to
secure adequate funding to finance acquisition opportunities will depend upon, among other things, our ability to
sell debt or equity securities, continued cooperation by our current lenders and the development of an active trading
market for our securities. Although we can make no assurance as to our long term access to debt or equity securities
or our ability to develop an active trading market, we were successful in securing $10.0 million in senior
subordinated debt in December 2011. The Company’s universal shelf registration statement on Form S-3, declared
effective May 11, 2012, provides the Company flexibility to raise capital through the sale of registered debt or
equity securities to the investing public. We have completed five material acquisitions since the initial acquisition of
Airgroup in January of 2006. In November 2007, the Company acquired certain assets of the Automotive Services
Group in Detroit, Michigan to service the automotive industry. In September 2008, the Company acquired Adcom
Express, Inc. d/b/a Adcom Worldwide ("Adcom"), adding an additional 30 locations across North America and
augmenting our overall domestic and international freight forwarding capabilities. In April 2011, the Company
acquired DBA Distribution Services, Inc. ("DBA"), which operates under the trade name "Distribution by Air",
adding two company owned logistics offices located in Somerset, New Jersey and Los Angeles, California and 23
independent agency offices across North America. In December 2011 the Company acquired the assets and
operations of Isla International Ltd. ("Isla") which added a company-owned location in Laredo, Texas serving as the
Company's gateway to the Mexico markets. Isla provides the Company with bilingual expertise in both north and
PH2 1076319v1 10/03/12
2
south bound cross-border transportation and logistics services to a diversified account base including manufacturers
in the automotive, appliance, electronics and consumer packaged goods industries. In February 2012, the Company
acquired the assets and operations of Brunswicks Logistics, Inc. d/b/a ALBS Logistics, Inc. (“ALBS”) adding a
company-owned location in New York-JFK, a strategic location for domestic and international logistics services.
Industry Overview
As business requirements for efficient and cost-effective logistics services have increased, so has the importance and
complexity of effectively managing freight transportation. Businesses increasingly strive to minimize inventory
levels, perform manufacturing and assembly operations in the lowest cost locations, and distribute their products in
numerous global markets. As a result, companies are increasingly looking to third-party logistics providers to help
them execute their supply chain strategies.
Customers have two principal third-party alternatives: a freight forwarder or a fully-integrated carrier. The Company
operates primarily as a freight forwarder. Freight forwarders procure shipments from customers and arrange the
transportation of cargo on a carrier. A freight forwarder may also arrange pick-up from the shipper to the carrier and
delivery of the shipment from the carrier to the recipient. Freight forwarders often tailor shipment routing to meet
the customer’s price and service requirements. Fully-integrated carriers, such as FedEx Corporation (“FedEx”),
DHL Worldwide Express, Inc. and United Parcel Service ("UPS"), provide pickup and delivery service, primarily
through their own captive fleets of trucks and aircraft. Because freight forwarders select from various transportation
options in routing customer shipments, they are often able to serve customers less expensively and with greater
flexibility than integrated carriers. Freight forwarders generally handle shipments of any size and offer a variety of
customized shipping options.
Most freight forwarders, including us, focus on heavier cargo and do not generally compete with integrated shippers
of primarily smaller parcels. In addition to the high fixed expenses associated with owning, operating and
maintaining fleets of aircraft, trucks and related equipment, integrated carriers often impose significant restrictions
on delivery schedules and shipment weight, size and type. On occasion, integrated shippers serve as a source of
cargo space to forwarders. Additionally, most freight forwarders do not generally compete with the major
commercial airlines, which, to some extent, depend on forwarders to procure shipments and supply freight to fill
cargo space on their scheduled flights.
We believe there are several factors that are increasing demand for global logistics solutions. These factors include:
• Outsourcing of non-core activities. Companies increasingly outsource freight forwarding, warehousing and
other supply chain activities to allow them to focus on their respective core competencies. From managing
purchase orders to the timely delivery of products, companies turn to third party logistics providers to
manage these functions at a lower cost and greater efficiency.
• Globalization of trade. As barriers to international trade are reduced or substantially eliminated, international
trade is increasing. In addition, companies increasingly are sourcing their parts, supplies and raw materials
from the most cost competitive suppliers throughout the world. Outsourcing of manufacturing functions to,
or locating company-owned manufacturing facilities in, low cost areas of the world also results in increased
volumes of world trade.
Increased need for time-definite delivery. The need for just-in-time and other time-definite delivery has
increased as a result of the globalization of manufacturing, greater implementation of demand-driven supply
chains, the shortening of product cycles and the increasing value of individual shipments. Many businesses
recognize that increased spending on time-definite supply chain management services can decrease overall
manufacturing and distribution costs, reduce capital requirements and allow them to manage their working
capital more efficiently by reducing inventory levels and inventory loss.
•
• Consolidation of global logistics providers. Companies are decreasing the number of freight forwarders and
supply chain management providers with which they interact. We believe companies want to transact
business with a limited number of providers that are familiar with their requirements, processes and
procedures, and can function as long-term partners. In addition, there is strong pressure on national and
regional freight forwarders and supply chain management providers to become aligned with a global
network. Larger freight forwarders and supply chain management providers benefit from economies of scale
which enable them to negotiate reduced transportation rates and to allocate their overhead over a larger
volume of transactions. Globally integrated freight forwarders and supply chain management providers are
better situated to provide a full complement of services, including pick-up and delivery, shipment via air, sea
and/or road transport, warehousing and distribution, and customs brokerage.
Increasing influence of e-business and the Internet. Technology advances have allowed businesses to connect
electronically through the Internet to obtain relevant information and make purchase and sale decisions on a
•
PH2 1076319v1 10/03/12
3
real-time basis, resulting in decreased transaction times and increased business-to-business activity. In
response to their customers' expectations, companies have recognized the benefits of being able to transact
business electronically. As such, businesses increasingly are seeking the assistance of supply chain service
providers with sophisticated information technology systems which can facilitate real-time transaction
processing and web-based shipment monitoring.
Our Growth Strategy
Our objective is to provide customers with comprehensive value-added logistics solutions. We plan to achieve this
goal through domestic and international freight forwarding services offered by us through our Radiant, Airgroup,
Adcom and DBA brands. We expect our business to grow organically and by completing acquisitions of other
companies with complementary geographical and logistics service offerings.
Our organic growth strategy involves strengthening existing and expanding new customer relationships. We have
and will continue to focus our efforts on the organic build-out of our network of independent agency locations, as
well as the enhancement of our back office infrastructure and transportation and accounting systems.
Our acquisition strategy has been designed to take advantage of shifting market dynamics. The third party logistics
industry continues to grow as an increasing number of businesses outsource their logistics functions to more cost
effectively manage and extract value from their supply chains. The industry is positioned for further consolidation as
it remains highly fragmented, and as customers are demanding the types of sophisticated and broad reaching service
offerings that can more effectively be handled by larger more diverse organizations. We believe the highly
fragmented composition of the marketplace, the industry participants' need for capital, and their owners' desire for
liquidity has and will continue to produce a large number of attractive acquisition candidates . More specifically, we
believe that there are a number of participants within the agent-based forwarding community that will be seeking
liquidity within the next several years as these owners approach retirement age , which creates a significant growth
opportunity by supporting these logistics entrepreneurs in transition. Our target acquisition candidates are generally
smaller than those identified as acquisition targets of larger public companies and have limited ability to conduct
their own public offerings or obtain financing that will provide them with capital for liquidity or rapid growth. These
“smaller” companies may be receptive to our acquisition program as a vehicle for liquidation or growth.
On a longer-term basis, we believe we can successfully implement our acquisition strategy due to the following
factors:
•
•
•
•
•
•
the highly fragmented composition of our market;
our strategy for creating an organization with global reach should enhance an acquired target company’s
ability to compete in its local and regional markets through an expansion of offered services and lower
operating costs;
the potential for increased profitability as a result of our centralization of certain administrative functions,
greater purchasing power and economies of scale;
our centralized management capabilities should enable us to effectively manage our growth and the
integration of acquired companies;
our status as a public corporation may ultimately provide us with a liquid trading currency for acquisitions;
and
the ability to utilize our experienced management to identify, acquire and integrate acquisition opportunities.
We intend to be opportunistic in executing our acquisition strategy with a goal of expanding both our domestic and
international capabilities.
Our Operating Strategy
Leverage the People, Process and Technology Available through a Central Platform . A key element of our
operating strategy is to maximize our operational efficiencies by integrating general and administrative functions
into our back-office operations and reducing or eliminating redundant functions and facilities at acquired companies.
This is designed to enable us to quickly realize potential savings and synergies, efficiently control and monitor
operations of acquired companies, and allow acquired companies to focus on growing their sales and operations.
Develop and Maintain Strong Customer Relationships . We seek to develop and maintain strong interactive
customer relationships by anticipating and focusing on our customers' needs. We emphasize a relationship-oriented
approach to business, rather than the transaction or assignment-oriented approach used by many of our competitors.
To develop close customer relationships, we and our network of agents regularly meet with both existing and
PH2 1076319v1 10/03/12
4
prospective clients to help design solutions for, and identify the resources needed to execute, their supply chain
strategies. We believe that this relationship-oriented approach results in greater customer satisfaction and reduced
business development expense.
Operations
Through our operating locations across North America, we offer domestic and international air, ocean and ground
freight forwarding for shipments that are generally larger than shipments handled by integrated carriers of primarily
small parcels such as FedEx and UPS. O ur revenues are generated from a number of diverse services, including air
freight forwarding, ocean freight forwarding, logistics and other value-added services.
Our primary business operations involve obtaining shipment or material orders from customers, creating and
delivering a wide range of logistics solutions to meet customers' specific requirements for transportation and related
services, and arranging and monitoring all aspects of material flow activity utilizing advanced information
technology systems. These logistics solutions include domestic and international freight forwarding and door-to-
door delivery services using a wide range of transportation modes, including air, ocean and truck. As a non-asset
based provider we do not own the transportation equipment used to transport the freight. We expect to neither own
nor operate any aircraft and, consequently, place no restrictions on delivery schedules or shipment size. We arrange
for transportation of our customers’ shipments via commercial airlines, air cargo carriers, and other assets and non-
asset based third-party providers. We select the carrier for a shipment based on route, departure time, available cargo
capacity and cost. We charter cargo aircraft from time to time depending upon seasonality, freight volumes and
other factors. We make a profit or margin on the difference between what we charge to our customers for the
services provided to them, and what we pay to the transportation providers to transport the freight.
Information Services
The regular enhancement of our information systems and ultimate migration of acquired companies and additional
agency locations to a common set of back-office and customer facing applications is a key component of our growth
strategy. We believe that the ability to provide accurate real-time information on the status of shipments has become
increasingly important and that our efforts in this area will result in competitive service advantages. In addition, we
believe that centralizing our transportation management system (rating, routing, tender and financial settlement
processes) will drive significant productivity improvement across our network.
We use a web-enabled third-party freight forwarding software (Cargowise) that is integrated to our third-party
accounting system (SAP). These systems combine to form the foundation of our supply-chain technologies, which
we call "Globalvision", and which provides us with a common set of back-office operating, accounting and
customer facing applications used across our network. We have and will continue to assess technologies obtained
through our acquisition strategy and expect to develop a "best-of-breed" solution set using a combination of owned
and licensed technologies. This strategy will require the investment of significant management and financial
resources to deliver these enabling technologies.
Our Competitive Advantages
As a non-asset based third-party logistics provider, we believe that we are well-positioned to provide cost-effective
and efficient solutions to address the demand in the marketplace for transportation and logistics services. We believe
that the most important competitive factors in our industry are quality of service, including reliability,
responsiveness, expertise and convenience, scope of operations, geographic coverage, information technology and
price. We believe our primary competitive advantages are: (i) our low cost, non-asset based business model; (ii) our
intention to develop a global network; (iii) our information technology resources; and (iv) our diverse customer
base.
Non-asset based business model. With relatively no dedicated or fixed operating costs, we are able to leverage our
network of locations to offer competitive pricing and flexible solutions to our customers. Moreover, our balanced
product offering provides us with revenue streams from multiple sources and enables us to retain customers even as
they shift from priority to deferred shipments of their products. We believe our model allows us to provide low-cost
solutions to our customers while also generating revenues from multiple modes of transportation and logistics
services.
Lower-risk operation of network of independent offices. We derive a substantial portion of our revenue pursuant to
agreements with independently-owned agent offices operating under our various brands. These arrangements afford
us with a relatively low risk of growth model as each individual agent office is responsible for its own sales and
costs of operations. Under shared revenue arrangements with our independent agent office owners, we are
PH2 1076319v1 10/03/12
5
responsible to provide centralized back-office infrastructure, transportation and accounting systems, billing and
collection services.
Advantages to independent office owners . Our current network is predominantly represented by independent agent
offices that rely on us for operating authority, technology, sales and marketing support, access to working capital,
our carrier network, and collective purchasing power. Through the agency relationship, the agent has the ability to
focus on the operational and sales support aspects of the business without diverting costs or expertise to the
structural aspect of its operations, providing the agent with the regional, national and global brand recognition that
they would not otherwise be able to achieve by solely serving their local market.
Intention to develop a global network. We intend to focus on strengthening our worldwide supply chain services,
which today include international air and ocean services that complement our North American network service
offerings. These offerings include heavyweight and small package air services, providing same day (next flight out)
air charters, next day a.m./p.m., second day a.m./p.m. as well as time definite surface transport moves. Our non-asset
based business model allows us to use commercial passenger and cargo flights. Thus, we have more than tens of
thousands of daily flight options to choose from. In addition, our pickup and delivery network provides us with zip
code to zip code coverage throughout North America.
Information technology resources. A primary component of our business strategy is the continued development of
advanced information systems to provide accurate and timely information to our management and customers. Our
customer delivery tools enable connectivity with our customers’ and trading partners’ systems, which leads to more
accurate and up-to-date information on the status of shipments.
Diverse customer base. We have a well-diversified customer base that includes manufacturers, distributors and
retailers. As of the date of this report, no single customer represented more than 5% of our business and no one
agency location represented more than 10% of our business, reducing risks associated with any particular industry,
geographic or customer concentration.
Sales and Marketing
We principally market our services through our network of company-owned and independent agent offices located
across North America. Each office is staffed with operational employees to provide support for the sales team,
develop frequent contact with the customer’s traffic department, and maintain customer service. Our current
network is predominantly represented by independent agent offices that rely on us for operating authority,
technology, sales and marketing support, access to working capital, our carrier network, and collective purchasing
power. Through the agency relationship, the agent has the ability to focus on the operational and sales support
aspects of the business without diverting costs or expertise to the structural aspect of its operations, providing the
agent with the regional, national and global brand recognition that they would not otherwise be able to achieve by
solely serving their local market. We have no customers or agency locations that separately account for more than
10% of our consolidated revenues, although we do have a number of significant customers and agency locations
with volume and stature, the loss of one or more of which could negatively impact our ability to retain and service
our customers.
Research and Development
During the past two years, we have not spent any material amount on research and development activities.
Competition and Business Conditions
The logistics business is directly impacted by the volume of domestic and international trade. The volume of such
trade is influenced by many factors, including economic and political conditions in the United States and abroad,
major work stoppages, exchange controls, currency fluctuations, acts of war, terrorism and other armed conflicts,
United States and international laws relating to tariffs, trade restrictions, foreign investments and taxation.
The global transportation and logistics services industry is intensively competitive and is expected to remain so for
the foreseeable future. We will compete against other domestic and international freight forwarders, as well as
integrated logistics companies, transportation services companies, consultants, information technology vendors and
shippers' transportation departments. This competition is based primarily on rates, quality of service (such as
damage-free shipments, on-time delivery and consistent transit times), reliable pickup and delivery and scope of
operations. Certain of our competitors have substantially greater financial resources than we do.
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Regulation
Interstate and international transportation of freight is highly regulated. Failure to comply with applicable state and
federal regulations, or to maintain required permits or licenses, can result in substantial fines or revocation of
operating permits or authorities imposed on both transportation intermediaries and their shipper customers. We
cannot give assurance as to the degree or cost of future regulations on our business. Some of the regulations
affecting our current and prospective operations are described below.
Air freight forwarding operations are subject to regulation, as an indirect air cargo carrier, under the Federal
Aviation Act as enforced by the Federal Aviation Administration of the U.S. Department of Transportation, and the
Transportation Security Administration of the Department of Homeland Security. While air freight forwarders are
exempted from most of the Federal Aviation Act's requirements by the Economic Aviation Regulations, the industry
is subject to ongoing regulatory and legislative developments that can impact the economics of the industry by
requiring changes to operating practices or influencing the demand for, and the costs of, providing services to
customers.
Surface freight forwarding operations are subject to various state and federal statutes, and are regulated by the
Federal Motor Carrier Safety Administration of the U.S. Department of Transportation and, to a very limited extent,
the Surface Transportation Board. These federal agencies have broad investigatory and regulatory powers, including
the power to issue a certificate of authority or license to engage in the business, to approve specified mergers,
consolidations and acquisitions, and to regulate the delivery of some types of domestic shipments and operations
within particular geographic areas.
The Federal Motor Carrier Safety Administration also has the authority to regulate interstate motor carrier
operations, including the regulation of certain rates, charges and accounting systems, to require periodic financial
reporting, and to regulate insurance, driver qualifications, operation of motor vehicles, parts and accessories for
motor vehicle equipment, hours of service of drivers, inspection, repair, maintenance standards and other safety
related matters. The federal laws governing interstate motor carriers have both direct and indirect application to the
Company. The breadth and scope of the federal regulations may affect our operations and the motor carriers that are
used in the provisioning of the transportation services. In certain locations, state or local permits or registrations may
also be required to provide or obtain intrastate motor carrier services.
The Federal Maritime Commission, or FMC, regulates and licenses ocean forwarding operations. Non-vessel
operating common carriers are subject to FMC regulation, under the FMC tariff filing and surety bond requirements,
and under the Shipping Act of 1984, particularly those terms proscribing rebating practices.
United States customs brokerage operations are subject to the licensing requirements of the Bureau of Customs and
Border Protection of the Department of Homeland Security. As we broaden our capabilities to include customs
brokerage operations, we will be subject to regulation by the Bureau of Customs and Border Protection. Likewise,
any customs brokerage operations must also be licensed in and subject to the regulations of countries into which
freight is imported.
Personnel
As of the date of this report, we have approximately 181 employees, of which 179 are full time. None of these
employees are covered by a collective bargaining agreement. We have experienced no work stoppages and consider
our relations with our employees to be good.
ITEM 1A. RISK FACTORS
RISKS PARTICULAR TO OUR BUSINESS
You should carefully consider the risk factors set forth below as well as the other information contained in or
incorporated by reference into this Form 10-K before investing in our common stock. Any of the following risks
could materially and adversely affect our business, financial condition or results of operations. In such a case, you
may lose all or part of your investment. The risks described below are not the only risks facing us. Additional risks
and uncertainties not currently known to us or those we currently view to be immaterial may also materially
adversely affect our business, financial condition or results of operations. The future trading price of shares of our
common stock will be affected by the performance of our business relative to, among other things, competition,
market conditions and general economic and industry conditions.
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Risks Related to our Business
We are largely dependent on the efforts of independent agents to generate our revenue and service our
customers.
We currently sell our services through some Company operated locations and through a network predominantly
represented by independently-owned agent offices that operate under our brands located throughout North America.
We have recently opened additional Company operated locations. However, substantially more than a majority of
our consolidated revenues are derived through our independent agent offices and we believe independent agent
relationships will remain important to our success. Our agreements with independent agents provide our agents with
benefits such as increased cash flow, back office and technology support, license to use our brands, vendor rates that
are likely better than those available to the independent agent on its own, a global network of other agents able to
assist in providing broad freight solutions. These agreements provide the Company with certain protections such as
an agent-funded reserve for bad debt, indemnification and often a personal guaranty. We have long-term
relationships with many of our agents, with automatic renewal of most of our contracts. Some contracts have
technically expired, but we continue to operate pursuant to the written terms of the agreements. As we renew
expired contracts, there can be no guarantee that we will be able to enter into new agreements that provide for the
same terms as those previously agreed. While we have no customers or agency locations that separately account for
more than 10% of our consolidated revenues, we do have a number of customers and agency locations with
significant volume and stature, the loss of one or more of which could negatively impact our ability to retain and
service our customers. We will need to expand our existing relationships and enter into new relationships in order to
increase our current and future market share and revenue. We cannot be certain that we will be able to maintain and
expand our existing relationships or enter into new relationships, or that new or renewed relationships will be
available on commercially reasonable terms. If we are unable to maintain and expand our existing relationships,
renew existing relationships, or enter into new relationships, we may lose customers, customer introductions and co-
marketing benefits and our operating results may suffer.
If our independent agent offices fail to maintain adequate reserves against unpaid customer invoices, or if we are
unable to setoff against amounts payable by us to our independent agent offices for unpaid customer invoices,
our results of operations and financial condition may be adversely affected.
The Company derives a substantial portion of its revenue pursuant to exclusive agency agreements with
independently-owned agent offices operating under the various Company brands. Each individual agent office is
responsible for some or all of the bad debt expense related to the underlying customers being serviced by the office.
To facilitate this arrangement, each office is 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 office’s bad
debt reserve account for any accounts receivable aged beyond 90 days. The bad debt reserve account is continually
replenished with a portion (typically 5% - 10%) of the office’s weekly commission check being directed to fund this
account. 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 are recognized as a receivable in the Company’s financial statements. Further, the agency agreements
provide that the Company may withhold all or a portion of future commission checks payable to the individual
office in satisfaction of any deficit balance. As of the date of this report, a number of the Company’s agency offices
have a deficit balance in their bad debt reserve account. The Company expects to replenish these funds through the
future business operations of these offices. However, to the extent any of these offices 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.
As of the date of this Report, the Company has begun collection proceedings against two customers who owe the
Company approximately $1.5 million. The Company has expensed its portion of these amounts. While there can be
no assurance as to the amount that may be recovered in the future, based upon, among others: (i) the Company’s
historic collection experience; (ii) the portion of the bad debt recoverable from the individual agency location
responsible for the account; and (iii) the anticipated recovery likely from these customers; the Company does not
believe its exposure to these customers will be material.
If we fail to develop and integrate information technology systems or we fail to upgrade or replace our
information technology systems to handle increased volumes and levels of complexity, meet the demands of our
agents and customers and protect against disruptions of our operations, we may suffer a loss in our business.
Increasingly, we compete for business based upon the flexibility, sophistication and security of the information
technology systems supporting our services. The failure of the hardware or software that supports our information
technology systems, the loss of data contained in the systems, or the inability to access or interact with our web site
or connect electronically, could significantly disrupt our operations, prevent clients from placing orders, or cause us
to lose inventory items, orders or clients. If our information technology systems are unable to handle additional
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volume for our operations as our business and scope of services grow, our service levels and operating efficiency
will decline. In addition, we expect our agents to continue to demand more sophisticated, fully integrated
information technology systems from us as customers demand the same from their supply chain services providers.
If we are unable to implement, maintain and protect our information technology systems or we fail to upgrade or
replace our information technology systems to handle increased volumes and levels of complexity, meet the
demands of our agents and customers and protect against disruptions of our operations, our business may be
adversely affected.
Our information technology systems are subject to risks we cannot control.
Our information technology systems are dependent upon third party communications providers, web browsers,
telephone systems and other aspects of the internet infrastructure that have experienced significant system failures
and electrical outages in the past. Our systems are susceptible to outages due to fire, floods, power loss,
telecommunications failures, break-ins and similar events. Despite our implementation of network security
measures, our servers are vulnerable to computer viruses, break-ins and similar disruptions from unauthorized
tampering with our computer systems. The occurrence of any of these events could disrupt or damage our
information technology systems and inhibit our internal operations, and our ability to provide services to our
customers.
Because our freight forwarding and domestic ground transportation operations are dependent on commercial
airfreight carriers and air charter operators, ocean freight carriers, major U.S. railroads, other transportation
companies, draymen and longshoremen, changes in available cargo capacity and other changes affecting such
carriers, as well as interruptions in service or work stoppages, may negatively impact our business.
We rely on commercial airfreight carriers and air charter operators, ocean freight carriers, trucking companies,
major U.S. railroads, other transportation companies, draymen and longshoremen for the movement of our clients’
cargo. Consequently, our ability to provide services for our clients could be adversely impacted by: shortages in
available cargo capacity; changes by carriers and transportation companies in policies and practices such as
scheduling, pricing, payment terms and frequency of service or increases in the cost of fuel, taxes and labor; and
other factors not within our control. Reductions in airfreight or ocean freight capacity could negatively impact our
yields. Material interruptions in service or stoppages in transportation, whether caused by strike, work stoppage,
lock-out, slowdown or otherwise, could adversely impact our business, results of operations and financial condition.
Our profitability depends on our ability to effectively manage our cost structure as we grow the business.
As we continue to increase our revenue through the expansion of our network of independent agency locations, we
must maintain an appropriate cost structure to maintain and increase our profitability. While we intend to increase
our revenue by increasing the number and quality of our agency relationships, by strategic acquisitions, and by
maintaining and expanding our gross profit margins by reducing transportation costs, our profitability will be driven
by our ability to manage our agent commissions, personnel and general and administrative costs as a function of our
net revenues. There can be no assurances that we will be able to increase revenues or maintain profitability.
Comparisons of our operating results from period to period are not necessarily meaningful and should not be
relied upon as an indicator of future performance.
Our operating results have fluctuated in the past and likely will continue to fluctuate in the future because of a
variety of factors, many of which are beyond our control. A substantial portion of our revenue is derived from
clients in industries whose shipping patterns are tied closely to economic trends and consumer demand that can be
difficult to predict, or are based on just-in-time production schedules. Because our quarterly revenues and operating
results vary significantly, comparisons of our results from period to period are not necessarily meaningful and
should not be relied upon as an indicator of future performance. Additionally, there can be no assurance that our
historic operating patterns will continue in future periods as we cannot influence or forecast many of these factors.
We face intense competition in the freight forwarding, logistics and supply chain management industry.
The freight forwarding, logistics and supply chain management industry is intensely competitive and is expected to
remain so for the foreseeable future. We face competition from a number of companies, including many that have
significantly greater financial, technical and marketing resources. There are a large number of companies competing
in one or more segments of the industry. Depending on the location of the customer and the scope of services
requested, we must compete against companies competing in specific segments and larger entities offering a full
complement of freight forwarding and supply chain management. In addition, customers increasingly are turning to
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competitive bidding situations soliciting bids from a number of competitors, including competitors that are larger
than us.
Our industry is consolidating and if we cannot gain sufficient market presence in our industry, we may not be
able to compete successfully against larger companies in our industry.
There currently is a trend within our industry toward consolidation of the niche players into larger companies that
are attempting to increase global operations through the acquisition of regional and local freight forwarders. If we
cannot gain sufficient market presence or otherwise establish a successful strategy in our industry, we may not be
able to compete successfully against larger companies in our industry with global operations.
If we are not able to limit our liability for customers’ claims through contract terms and limit our exposure
through the purchase of insurance, we could be required to pay large amounts to our clients as compensation for
their claims and our results of operations could be materially adversely affected.
In general, we seek to limit by contract and/or International Conventions and laws our liability to our clients for loss
or damage to their goods to $20 per kilogram (approximately $9.07 per pound) and $500 per carton or customary
unit, for ocean freight shipments, depending on the International Convention. For truck/land based risks, there are a
variety of limits ranging from a nominal amount to full value. However, because a freight forwarder relationship to
an airline or ocean carrier is that of a shipper to a carrier, the airline or ocean carrier generally assumes the same
responsibility to us as we assume to our clients. When we act in the capacity of an authorized agent for an air or
ocean carrier, the carrier, rather than us, assumes liability for the safe delivery of the client’s cargo to its ultimate
destination, unless due to our own errors and omissions.
We have, from time to time, made payments to our clients for claims related to our services and may make such
payments in the future. Should we experience an increase in the number or size of such claims or an increase in
liability pursuant to claims or unfavorable resolutions of claims, our results could be adversely affected. There can
be no assurance that our insurance coverage will provide us with adequate coverage for such claims or that the
maximum amounts for which we are liable in connection with our services will not change in the future or exceed
our insurance levels. As with every insurance policy, there are limits, exclusions and deductibles that apply and we
could be subject to claims for which insurance coverage may be inadequate or even disputed and such claims could
adversely impact our financial condition and results of operations. In addition, significant increases in insurance
costs could reduce our profitability.
Our failure to comply with, or the costs of complying with, government regulation could negatively affect our
results of operation.
Our business is subject to heavy, evolving, complex and increasing regulation by national and international sources.
Regulatory changes could affect the economics of our industry by requiring changes in operating practices or
influencing the demand for, and the costs of providing, services to customers. Future regulation and our failure to
comply with any applicable regulations could have a material adverse effect on our business.
If we are unable to maintain our brand image and corporate reputation, our business may suffer.
Our success depends in part on our ability to maintain the image of the Radiant brand and our reputation for
providing excellent service to our customers. Service quality issues, actual or perceived, even when false or
unfounded, could tarnish the image of our brand and may cause customers to use other freight-forwarding
companies. Damage to our reputation and loss of brand equity could reduce demand for our services and thus have
an adverse effect on our business, financial position and results of operations, and could require additional resources
to rebuild our reputation and restore the value of our brand.
Our Bank of America credit facility and our Caltius mezzanine subordinated notes contain financial covenants
that may limit current availability and impose ongoing operational limitations and risk of compliance.
We currently maintain a $20.0 million revolving credit facility with Bank of America, N.A. (“BofA”), which
includes a $1.0 million sublimit to support letters of credit (collectively, the “Credit Facility”). Under the terms of
the Credit Facility, we are subject to a number of financial covenants that may limit the amount otherwise available
under that facility. The first financial covenant limits our ratio of "Funded Debt" (as defined therein) to consolidated
earnings before interest, taxes, depreciation and amortization (“EBITDA”) (as adjusted) and measured on a rolling
four quarter basis to 4.00 to 1, reducing to 3.75 to 1 at December 31, 2012, 3.5 to 1 at December 31, 2013, and 3.25
to 1 at December 31, 2014. The second financial covenant limits our ratio of Senior Debt (defined as amounts
borrowed from BofA) to consolidated EBITDA (as adjusted) and measured on a rolling four quarter basis to 2.50 to
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1 and reducing to 2.25 to 1 on December 31, 2012. The third financial covenant requires us to maintain a basic fixed
charge coverage ratio of at least 1.25 to 1.0. The fourth financial covenant is a minimum profitability standard which
requires us not to incur a net loss before taxes, amortization of acquired intangibles and extraordinary items in any
two consecutive quarterly accounting periods.
In connection with our acquisition of the assets and operations of Isla International, Ltd. in December 2011, we
entered into an Investment Agreement (the “Investment Agreement”) with Caltius Partners IV, LP and Caltius
Partners Executive IV, LP (collectively, “Caltius”) pursuant to which we borrowed $10.0 million in exchange for a
series of Senior Subordinated Notes (the "Caltius Financing"). Under the Caltius Financing, we are subject to certain
financial covenants, including funded leverage ratio covenants, senior funded leverage ratio covenants and fixed
charges ratio covenants. The first financial covenant limits our ratio of "Funded Debt" (as defined therein) to
consolidated EBITDA (as adjusted) and measured on a rolling four quarter basis to 4.25 to 1, reducing to 4.00 to 1 at
March 31, 2013, 3.75 to 1 at March 31, 2014 and 3.50 to 1 at March 31, 2015. The second financial covenant limits
our ratio of Senior Debt (defined as amounts borrowed from BofA and the Senior Subordinated Notes) to
consolidated EBITDA (as adjusted) and measured on a rolling four quarter basis to 3.75 to 1, reducing to 3.50 to 1
on March 31, 2013, 3.25 to 1 on March 31, 2014 and 3.00 to 1 on March 31, 2015. The third financial covenant
requires that we maintain a basic fixed charge coverage ratio of at least 1.05 to 1.0.
In addition, we are subject to significant restrictions upon prepayment and penalties if we prepay the outstanding
indebtedness during the three year period after the Caltius Financing. Further, Caltius has the right, under certain
circumstances, to require us to redeem all shares of our common stock issued to Caltius in connection with the
Caltius Financing at the then fair market value of such shares. The Caltius Financing also constrains our ability to
obtain additional financing unless we obtain Caltius’s consent. The Caltius Financing also places restrictions on our
ability to enter into future financings and acquisitions. If we are unable to satisfy our obligations under the Caltius
Financing, we may be required to, among other things, immediately repay all outstanding principal and interest
under the Caltius Financing, redeem all shares issued to Caltius in connection with the Caltius Financing, and forego
future financing and acquisition opportunities. This may have a material adverse effect on our financial condition
and results of operations.
Dependence on key personnel.
For the foreseeable future, our success will depend largely on the continued services of our Chief Executive Officer,
Bohn H. Crain, as well as certain of the other key executives because of their collective industry knowledge,
marketing skills and relationships with major vendors and agent office owners. We have secured employment
arrangements with each of these individuals, which contain non-competition covenants that survive their actual term
of employment. Nevertheless, should any of these individuals leave the Company, it could have a material adverse
effect on our future results of operations.
Our results of operations could vary as a result of the methods, estimates, and judgments that we use in applying
our accounting policies.
The methods, estimates, and judgments that we use in applying our accounting policies have a significant impact on
our results of operations (see “Critical Accounting Estimates” in Part II, Item 7 of this Form 10-K). Such methods,
estimates, and judgments are, by their nature, subject to substantial risks, uncertainties, and assumptions, and factors
may arise over time that lead us to change our methods, estimates, and judgments. Changes in those methods,
estimates, and judgments could significantly affect our results of operations.
Terrorist attacks and other acts of violence or war may affect our operations and our profitability.
Terrorist acts or acts of war or armed conflict, both foreign and domestic, could negatively affect our operations in a
number of ways. Primarily, any of these acts could result in increased volatility in or damage to the U.S. and
worldwide financial markets and economy and could lead to increased regulatory requirements with respect to the
security and safety of freight shipments and transportation. Acts of terrorism or armed conflict, and the uncertainty
caused by such conflicts, could cause an overall reduction in worldwide sales of goods and corresponding shipments
of goods. This would have a corresponding negative effect on our operations.
Risks Related to our Acquisition Strategy
There is a scarcity of and competition for acquisition opportunities.
There are a limited number of operating companies available for acquisition that we deem to be desirable targets. In
addition, there is a very high level of competition among companies seeking to acquire these operating companies.
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We are and will continue to be a very minor participant in the business of seeking acquisitions of these types of
companies. A large number of established and well-financed entities are active in acquiring interests in companies
that we may find to be desirable acquisition candidates. Many of these entities have significantly greater financial
resources, technical expertise and managerial capabilities than us. Consequently, we will be at a competitive
disadvantage in negotiating and executing possible acquisitions of these businesses. Even if we are able to
successfully compete with these entities, this competition may affect the terms of completed transactions and, as a
result, we may pay more than we expected for potential acquisitions. We may not be able to identify operating
companies that complement our strategy, and even if we identify a company that complements our strategy, we may
be unable to complete an acquisition of such a company for many reasons, including:
•
•
•
•
•
•
failure to agree on the terms necessary for a transaction, such as the purchase price;
incompatibility between our operational strategies or management philosophies with those of the potential
acquiree;
competition from other acquirers of operating companies;
lack of sufficient capital to acquire a profitable logistics company;
unwillingness of a potential acquiree to agree to subordinate any future payment of earn-outs or
promissory notes to the payments due to Caltius; and
unwillingness of a potential acquiree to work with our management.
Risks related to acquisition financing.
We have a limited amount of financial resources and our ability to make additional acquisitions without securing
additional financing from outside sources is limited. In order to continue to pursue our acquisition strategy, we may
be required to obtain additional financing. We intend to obtain such financing through a combination of traditional
debt financing or the placement of debt and equity securities. We may finance some portion of our future
acquisitions by either issuing equity or by using shares of our common stock for all or a portion of the purchase
price for such businesses. In the event that our common stock does not attain or maintain a sufficient market value,
or potential acquisition candidates are otherwise unwilling to accept our common stock as part of the purchase price
for the sale of their businesses, we may be required to use more of our cash resources, if available, in order to
maintain our acquisition program. If we do not have sufficient cash resources, we will not be able to complete
acquisitions and our growth could be limited unless we are able to obtain additional capital through debt or equity
financings. The terms of our Credit Facility and Caltius Financing each require that we obtain their consent prior to
securing additional debt financing. There could be circumstances in which our ability to obtain additional debt
financing could be constrained if we are unable to secure the consent of each of BofA and Caltius.
Our Bank of America Credit Facility places certain limits on the type and number of acquisitions we may make.
Under the terms of our Credit Facility, we may be required to obtain BofA’s consent prior to making any additional
acquisitions.
We are permitted to make additional acquisitions without the consent of BofA only if certain conditions are
satisfied. The conditions imposed by the Credit Facility include the following: (i) the absence of an event of default
under the Credit Facility; (ii) the company to be acquired must be in the transportation and logistics industry; (iii)
the purchase price to be paid must be consistent with our historical business and acquisition model; (iv) after giving
effect for the funding of the acquisition, we must have undrawn availability of at least $4.0 million under the Credit
Facility; (v) BofA must be reasonably satisfied with projected financial statements we provide covering a twelve
month period following the acquisition; (vi) the acquisition documents must be provided to BofA and must be
consistent with the description of the transaction provided to BofA; and (vii) the number of permitted acquisitions is
limited to three per fiscal year and the aggregate cash consideration payable at closing shall not exceed $7.5 million
for any single transaction and $12.5 million in the aggregate, provided that the foregoing limitation shall exclude
cash consideration derived from the proceeds of sales of our newly issued equity interests during the nine-month
period prior to the closing of any such transaction and the aggregate consideration at closing is not more than $25
million.
In the event we are not able to satisfy the conditions of the Credit Facility in connection with a proposed acquisition,
we must either forego the acquisition, obtain BofA’s consent, or retire the Credit Facility. This may prevent us from
completing acquisitions that we determine are desirable from a business perspective and limit or slow our ability to
achieve the critical mass we need to achieve our strategic objectives.
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The Caltius Financing requires us to meet certain financial covenants and subjects us to restrictions on future
financings and acquisitions.
The Caltius Financing also places restrictions on our ability to enter into future financings and acquisitions.
We are permitted to make additional acquisitions only if certain conditions are satisfied, including the following: (i)
the acquisition constitutes a business reasonably related to our then current business; (ii) no default or event of
default shall exist prior to or will be caused as a result of such acquisition; (iii) Caltius has been provided with prior
written notice of such acquisition, such notice to include (a) a description of the property or equity interests to be
purchased, (b) the price and terms of such acquisition, (c) a certificate of a financial officer, certifying as to certain
information requested in the Investment Agreement, and (d) such other information with respect thereto as is
reasonably requested by Caltius; (iv) in the event of an acquisition of equity interests of a company, such company
shall become a wholly-owned subsidiary; (v) the target company shall have as of the last day of the most recent
fiscal quarter of such company ending on or immediately prior to the date of such acquisition actual (or pro forma to
the extent approved in writing by Caltius) EBITDA and net income greater than $1, in each case for the 12 month
period ending on such date; (vi) the aggregate cash consideration payable at the closing of the acquisition shall not
exceed $7.5 million for any single transaction and $12.5 million in the aggregate in any fiscal year or such other
amount approved in writing by the Caltius; provided, however, that (a) the foregoing limitation shall exclude cash
consideration derived from the proceeds of sales of our equity interests issued during the nine-month period prior to
the closing of such acquisition to the extent we notify Caltius in writing of the use of such cash consideration from
sales such equity interests in such transaction or transactions and (b) the written consent of Caltius shall be required
if the aggregate cash consideration payable at the closing of such transaction is equal to or greater than $25 million;
(vii) the post-closing availability under the Credit Facility is at least $4.0 million on a pro forma basis; (viii) the
number of permitted acquisitions that we and our co-borrowers have completed in such fiscal year does not exceed
three; (ix) any future acquisition consideration in the form of earn-out payments and/or payments under promissory
notes is expressly subordinated to any future amounts due and owing to Caltius; and (x) we shall have provided to
Caltius certain deliverables for such acquisition.
We or our subsidiaries may, however, acquire at least 51% of the equity of another entity (“Permitted Investment”)
so long as (i) the aggregate consideration for all such Permitted Investments does not exceed $1.0 million, (ii) we (or
our subsidiary, as applicable) control and own at least 51% of the acquired entity, and (iii) we (or our subsidiary, as
applicable) comply with all of the requirements of the preceding paragraph, other than the requirements set forth in
sections (iv) and (vi).
If we are unable to satisfy our obligations under the Caltius Financing, we may be required to, among other things,
immediately repay all outstanding principal and interest under the Caltius Financing, redeem all shares issued to
Caltius in connection with the Caltius Financing, and forego future financing and acquisition opportunities. This
may have a material adverse effect on our financial condition and results of operations.
To the extent we make any material acquisitions, our earnings will be adversely affected by non-cash charges
relating to the amortization of intangibles, which may cause our stock price to decline.
Under applicable accounting standards, purchasers are required to allocate the total consideration paid in a business
combination to the identified acquired assets and liabilities based on their fair values at the time of acquisition. The
excess of the consideration paid to acquire a business over the fair value of the identifiable tangible assets acquired
must be allocated among identifiable intangible assets including goodwill. The amount allocated to goodwill is not
subject to amortization. However, it is tested at least annually for impairment. The amount allocated to identifiable
intangibles, such as customer relationships and the like, is amortized over the life of these intangible assets. We
expect that this will subject us to periodic charges against our earnings to the extent of the amortization incurred for
that period. Because our business strategy focuses, in part, on growth through acquisitions, our future earnings will
be subject to greater non-cash amortization charges than a company whose earnings are derived solely from organic
growth. As a result, we will experience an increase in non-cash charges related to the amortization of intangible
assets acquired in our acquisitions. Our financial statements will show that our intangible assets are diminishing in
value, when, in fact, we believe they may be increasing because we are growing the value of our intangible assets
(e.g. customer relationships). Because of this discrepancy, we believe our EBITDA, a measure of financial
performance that does not conform to generally accepted accounting principles ("GAAP"), provides a meaningful
measure of our financial performance. However, the investment community generally measures a public company’s
performance by its net income. Further, the financial covenants of our Credit Facility adjust EBITDA to exclude
costs related to share based compensation and other non-cash charges. Thus, we believe EBITDA, and adjusted
EBITDA, provide a meaningful measure of our financial performance. If the investment community elects to place
more emphasis on net income, the future price of our common stock could be adversely affected.
PH2 1076319v1 10/03/12
13
We are not obligated to follow any particular criteria or standards for identifying acquisition candidates.
Even though we have developed general acquisition guidelines, other than as required under the Credit Facility or
Caltius Financing, we are not obligated to follow any particular operating, financial, geographic or other criteria in
evaluating candidates for potential acquisitions or business combinations. We will target businesses that we believe
will provide the best potential long-term financial return for our stockholders and we will determine the purchase
price and other terms and conditions of acquisitions. Our stockholders will not have the opportunity to evaluate the
relevant economic, financial and other information that our management team will use and consider in deciding
whether or not to enter into a particular transaction.
We may be required to incur a significant amount of indebtedness in order to successfully implement our
acquisition strategy.
Subject to the restrictions contained in the Credit Facility and Investment Agreement with Caltius, we may be
required to incur a significant amount of indebtedness in order to complete future acquisitions. If we are not able to
generate sufficient cash flow from the operations of acquired businesses to make scheduled payments of principal
and interest on the indebtedness, then we will be required to use our capital for such payments. This will restrict our
ability to make additional acquisitions. We may also be forced to sell an acquired business in order to satisfy
indebtedness. We cannot be certain that we will be able to operate profitably once we incur this indebtedness or that
we will be able to generate a sufficient amount of proceeds from the ultimate disposition of such acquired businesses
to repay the indebtedness incurred to make these acquisitions.
We may experience difficulties in integrating the operations, personnel and assets of acquired businesses that
may disrupt our business, dilute stockholder value and adversely affect our operating results.
A core component of our business plan is to acquire businesses and assets in the transportation and logistics
industry. There can be no assurance that we will be able to identify, acquire or profitably manage businesses or
successfully integrate acquired businesses into the Company without substantial costs, delays or other operational or
financial problems. Such acquisitions also involve numerous operational risks, including:
•
•
•
•
•
•
•
difficulties in integrating operations, technologies, services and personnel;
the diversion of financial and management resources from existing operations;
the risk of entering new markets;
the potential loss of existing or acquired agency locations following an acquisition;
the potential loss of key employees following an acquisition and the associated risk of competitive efforts
from such departed personnel;
possible legal disputes with the acquired company following an acquisition; and
the inability to generate sufficient revenue to offset acquisition or investment costs.
As a result, if we fail to properly evaluate and execute any acquisitions or investments, our business and prospects
may be seriously harmed.
Legal dispute emanating from recent acquisition of DBA.
In February 2012, we initiated an arbitration action asserting certain claims for indemnification against the former
shareholders of DBA under the Agreement and Plan of Merger (the “DBA Agreement”) dated March 29, 2011,
relating to, among others, the failure to identify certain purchased transportation charges and related party
transactions, as well as the breach of certain non-competition and non-solicitation covenants by one of the DBA
selling shareholders and a former DBA employee affiliated with such selling shareholder.
Although the arbitration and ultimate resolution of this dispute will not likely occur for several months, we believe
that these breaches will not have any meaningful long-term adverse effect on our overall results of operations given
our: (i) termination of the previously undisclosed related party transactions; (ii) efforts to retain existing customers;
(iii) efforts through the arbitration proceeding to assert legal remedies as a result of the breaches; and (iv) efforts
through a concurrent civil proceeding to assert legal remedies against the former DBA employee who we believe
breached certain non-competition and non-solicitation obligations to us. Nevertheless, near-term earnings could be
negatively impacted if our efforts to retain existing customers are not successful, and as a result of any legal
expenses incurred in connection with the matter, although such amounts may be recoverable as an off-set to future
amounts otherwise due to the former shareholders of DBA under the DBA Agreement.
PH2 1076319v1 10/03/12
14
Risks Related to our Common Stock
Provisions of our certificate of incorporation, bylaws and Delaware law may make a contested takeover more
difficult.
Certain provisions of our certificate of incorporation, bylaws and the General Corporation Law of the State of
Delaware ("DGCL") could deter a change in our management or render more difficult an attempt to obtain control of
us, even if such a proposal is favored by a majority of our stockholders. For example, we are subject to the
provisions of the DGCL that prohibit a public Delaware corporation from engaging in a broad range of business
combinations with a person who, together with affiliates and associates, owns 15% or more of such corporation’s
outstanding voting shares (an "interested stockholder") for three years after the person became an interested
stockholder, unless the business combination is approved in a prescribed manner. Our certificate of incorporation
provides that directors may only be removed for cause by the affirmative vote of 75% of our outstanding shares and
that amendments to our bylaws require the affirmative vote of holders of two-thirds of our outstanding shares. Our
certificate of incorporation also includes undesignated preferred stock, which may enable our Board of Directors to
discourage an attempt to obtain control of us by means of a tender offer, proxy contest, merger or otherwise. Finally,
our bylaws include an advance notice procedure for stockholders to nominate directors or submit proposals at a
stockholders meeting.
Trading in our common stock has been limited and there is no significant trading market for our common stock.
Although our common stock is traded on the NYSE-MKT, it may remain relatively illiquid, or “thinly traded.”
Because of this limited liquidity, stockholders may be unable to sell their shares. The trading price of our shares may
from time to time fluctuate widely. The trading price may be affected by a number of factors including events
described in the risk factors set forth in this report as well as our operating results, financial condition,
announcements, general conditions in the industry and the financial markets, and other events or factors. In recent
years, broad stock market indices, in general, and smaller capitalization companies, in particular, have experienced
substantial price fluctuations. In a volatile market, we may experience wide fluctuations in the market price of our
common stock. These fluctuations may have a negative effect on the market price of our common stock.
The influx of additional shares of our common stock onto the market may create downward pressure on the
trading price of our common stock.
We recently completed several acquisitions in which we issued approximately 1.3 million unregistered shares of our
common stock over the past 12 months as part of the purchase price, or associated with the financing of a
transaction. In addition, we may issue additional shares in connection with such acquisitions upon the achievement
of certain earn-out thresholds. The availability of those shares for sale to the public under Rule 144 of the Securities
Act, as amended (the “Securities Act”) and sale of such shares in public markets could have an adverse effect on the
market price of our common stock. Such an adverse effect on the market price would make it more difficult for us to
sell our equity securities in the future at prices we deem appropriate or to use our shares as currency for future
acquisitions which will make it more difficult to execute our acquisition strategy.
The issuance of additional shares may result in additional dilution to our existing stockholders.
We have issued, and may be required to issue, additional shares of common stock or common stock equivalents in
payment of the purchase price of businesses we have acquired. This will have the effect of further increasing the
number of shares outstanding. In connection with future acquisitions, we may undertake the issuance of more shares
of common stock without notice to our then existing stockholders. We may also issue additional shares in order to,
among other things, compensate employees or consultants or for other valid business reasons in the discretion of our
Board of Directors, which could result in diluting the interests of our existing stockholders.
The exercise or conversion of our outstanding options, warrants or other convertible securities or any derivative
securities we issue in the future will result in the dilution of the ownership interests of our existing stockholders and
may create downward pressure on the trading price of our common stock. We are currently authorized to issue 50
million shares of common stock. As of September 20, 2012, we had 33,041,430 outstanding shares of common
stock. We may in the future issue up to 4,923,174 additional shares of our common stock upon exercise of existing
options.
We may issue shares of preferred stock with greater rights than our common stock.
Although we have no current plans or agreements to issue any preferred stock, our certificate of incorporation
authorizes our Board of Directors to issue shares of preferred stock and to determine the price and other terms for
PH2 1076319v1 10/03/12
15
those shares without the approval of our stockholders. Any such preferred stock we may issue in the future could
rank ahead of our common stock in many ways, including in terms of dividends, liquidation rights, and voting
rights.
As we do not anticipate paying dividends, investors in our shares will not receive any dividend income.
We have not paid any cash dividends on our common stock since our inception and we do not anticipate paying cash
dividends in the foreseeable future. Any dividends that we may pay in the future will be at the discretion of our
Board of Directors, and will depend on our future earnings, any applicable regulatory considerations, our financial
requirements and other similarly unpredictable factors. Our ability to pay dividends is further limited by the terms of
our Credit Facility with BofA and the Investment Agreement with Caltius. For the foreseeable future, we anticipate
that we will retain any earnings that we may generate from our operations to finance and develop our growth and
that we will not pay cash dividends to our stockholders. Accordingly, investors seeking dividend income should not
purchase our stock.
From time to time, we publish certain forward-looking information regarding our future anticipated
performance, which information may be materially different than our actual future results.
From time to time, we publish certain forward-looking information regarding our future anticipated performance,
including guidance with respect to our estimated future revenues and profits. This forward-looking information is
not a guaranty and is subject to known and unknown risks, uncertainties and assumptions about us that may cause
our actual results, levels of activity, performance or achievements to be materially different from any future results,
levels of activity, performance or achievements expressed or implied by such forward-looking information. While it
is impossible to identify all of the factors that may cause our actual operating performance, events, trends or plans to
differ materially from those set forth in such forward-looking information, such factors include the inherent risks
associated with our recent and future acquisitions, our operations, management and other outside competitive and
economic influences on our business. Important factors with regard to our recent acquisitions that could cause our
actual results to differ from our expectations, include but are not limited to: our ability to maintain the future
operations of our recently acquired businesses in a manner consistent with their past practices; our recently acquired
businesses will be able to maintain and grow their revenues and operating margins in a manner consistent with their
most recent results of operations; our ability to integrate the operations of such businesses with our existing
operations, as well as our ability to realize expected financial and operational cost and revenue synergies through
such integration; our reliance on the acquired management teams and the continued customer relationships provided
by the acquired businesses; the effect that these acquisitions will have on their existing customers and employees;
the effect that the acquisitions will have on our historic and existing network of locations; and any material adverse
change in the composition of their customers. Important additional factors that could cause our actual results to
differ from our expectations include, but are not limited to, our ability to: use our Bellevue, Washington operations
as a "platform" upon which we can build a profitable global transportation and supply chain management company;
retain and build upon the relationships we have with our agency offices; continue the development of our back
office infrastructure and transportation and accounting systems in a manner sufficient to service our expanding
revenues and network of operating locations; maintain and enhance the future operations of our company owned
operating locations; continue growing our business and maintain historical or increased gross profit margins; locate
suitable acquisition opportunities; secure the financing necessary to complete any acquisition opportunities we
locate; assess and respond to competitive practices in the industries in which we compete; mitigate, to the best extent
possible, our dependence on current management and certain of our larger agency relationships; assess and respond
to the impact of current and future laws and governmental regulations affecting the transportation industry in general
and our operations in particular; and assess and respond to such other factors that may be identified from time to
time in our SEC filings and other public announcements.
Ineffective internal controls could impact our business and operating results.
Our internal control over financial reporting may not prevent or detect misstatements because of its inherent
limitations, including the possibility of human error, the circumvention or overriding of controls, or fraud. Even
effective internal controls can provide only reasonable assurance with respect to the preparation and fair presentation
of financial statements. If we fail to maintain the adequacy of our internal controls, including any failure to
implement required new or improved controls, or if we experience difficulties in their implementation, our business
and operating results could be harmed and we could fail to meet our financial reporting obligations.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None
PH2 1076319v1 10/03/12
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ITEM 2. PROPERTIES
Our principal executive offices are located at 405 114 th Avenue S.E., Third Floor, Bellevue, Washington 98004 and
consist of 13,018 feet of office space which we lease for an average of $16,020 per month over the life of the lease
expiring May 31, 2021. We also sublease 3,110 feet of office space in the same building for an average of $4,067
per month over the life of the sublease expiring on May 31, 2020. In addition, we lease 92,503 feet of space for our
company-owned office in Somerset, New Jersey for an average of $43,816 per month over the life of the lease
expiring November 30, 2014. For our company-owned office in Hawthorne, California, we lease 140,200 of space in
two neighboring buildings for an average of $88,403 per month over the life of lease expiring February 29, 2016.
We believe our current offices are adequately covered by insurance and are sufficient to support our operations for
the foreseeable future.
ITEM 3. LEGAL PROCEEDINGS
From time to time, the Company and our operating subsidiaries are involved in claims, proceedings and litigation,
including the following:
DBA Distribution Services, Inc.
In February 2012, we initiated an arbitration action with the American Arbitration Association (Case No. 18 125 Y
00196 12) asserting certain claims for indemnification against the former shareholders of DBA under the DBA
Agreement dated March 29, 2011. Our claims are based upon breaches that occurred under the DBA Agreement that
arose as a result of, among others, the failure of the former DBA shareholders to properly disclose certain purchased
transportation charges, related party transactions, tax obligations and certain real property leases, as well as the
breach of certain non-competition and non-solicitation covenants by Paul Pollara, one of the DBA selling
shareholders, and Bretta Santini Pollara, a former DBA employee and wife of Mr. Pollara. Subject to certain baskets
and caps within the DBA Agreement, we are seeking relief in the form of an award permitting us to, among other
things, assert setoff rights against the full amount of a $1.8 million “Integration Payment” and against certain
amounts of a $2.4 million promissory note otherwise due to be paid under the DBA Agreement, as well as injunctive
relief restraining future breaches of certain non-competition and non-solicitation covenants by Mr. Pollara, directly,
and by Mr. Pollara, indirectly through his wife, Ms. Pollara, plus our attorneys’ fees and costs. In response to our
claims, the former DBA shareholders have asserted a counterclaim against us for payment of the $1.8 million
“Integration Payment”. The parties are engaged in the discovery process, and an arbitration hearing is currently
scheduled to begin in the fourth calendar quarter of 2012. We intend to vigorously assert our claims and defend
against the counterclaim.
In a related matter, in December 2011, Ms. Pollara filed a claim in California Superior Court for declaratory relief
against the Company seeking an order stipulating that she is not bound by the non-compete covenant contained
within the DBA Agreement signed by her husband, Mr. Pollara. The Company removed the matter to federal court
on January 13, 2012. On January 23, 2012, the Company filed a counterclaim against Ms. Pollara, her company
Santini Productions, Daniel Reffner (a former employee of the Company now working for Ms. Pollara), and
Oceanair, Inc. (a company doing business with Santini Productions). The Company’s counterclaim alleges claims
for statutory and common law misappropriation of trade secrets, breach of duty of loyalty, and unfair competition,
and seeks damages in excess of $500,000. Following denial of a motion for preliminary injunctive relief due to lack
of standing, DBA and RGL, wholly owned subsidiaries of the Company, will be added as counterclaimants in the
lawsuit as DBA owns the trade secrets that we believe were misappropriated by Ms. Pollara and RGL was Ms.
Pollara’s employer. The trial date is scheduled for May 7, 2013. We intend to vigorously assert our counterclaims
and defend against the claim for declaratory relief.
In addition to the foregoing, we are involved in various other claims and legal actions arising in the ordinary course
of business. In the opinion of management, the ultimate disposition of these matters will not have a material adverse
effect on our consolidated financial position, results of operations or liquidity.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
PH2 1076319v1 10/03/12
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PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS
AND ISSUER PURCHASES OF EQUITY SECURITIES
Market Information
Our common stock currently trades on the NYSE MKT under the symbol "RLGT." Prior to January 2012, our
common stock was quoted on the OTCQB. The following table states the range of the high and low bid and sales
prices per share, as applicable, of our common stock for each calendar quarter during our past two fiscal years, as
reported by the OTCQB and NYSE MKT, as applicable. These quotations represent inter-dealer prices, without
retail mark-up, markdown, or commission, and may not represent actual transactions. The last price of our common
stock as reported on the NYSE MKT on September 20, 2012, was $1.72 per share.
Year Ended June 30, 2012:
Quarter ended June 30, 2012
Quarter ended March 31, 2012
Quarter ended December 31, 2011
Quarter ended September 30, 2011
Year Ended June 30, 2011:
Quarter ended June 30, 2011
Quarter ended March 31, 2011
Quarter ended December 31, 2010
Quarter ended September 30, 2010
Holders
High
Low
$
$
$
$
2.19
2.54
2.50
2.52
2.45
2.05
1.20
.39
1.66
2.11
2.18
1.95
2.00
.90
.36
.27
As of September 20, 2012, the number of stockholders of record of our common stock was 124. However, based
upon broker inquiries conducted during December 2011, in conjunction with our listing on the NYSE MKT, we
believe there are a substantial number of additional beneficial owners of our common stock who hold their shares in
street name.
Dividend Policy
We have not paid any cash dividends on our common stock to date, and we have no intention of paying cash
dividends in the foreseeable future. Whether we declare and pay dividends will be determined by our board of
directors at its discretion, subject to certain limitations imposed under Delaware law. The timing, amount and form
of dividends, if any, will depend on, among other things, our results of operations, financial condition, cash
requirements and other factors deemed relevant by our Board of Directors. Our ability to pay dividends is limited by
the terms of our Credit Facility with BofA and the Investment Agreement with Caltius.
Transfer Agent
Broadridge Financial Solutions, Inc., 1981 Marcus Avenue, Lake Success, NY 11042, serves as our transfer agent.
Recent Issuance of Unregistered Securities
From July 1, 2011 through June 30, 2012 we have issued the following unregistered securities:
•
•
•
•
•
In December 2011, we issued 134,475 shares of common stock to the former shareholder of Adcom,
valued at approximately $0.3 million. These shares were issued in connection with an earn-out obligation
derived from our acquisition of Adcom in September 2008.
In December 2011, we issued 500,000 shares of common stock to Caltius valued at $1.175 million.
In March 2012, we issued 552,333 shares of common stock to the shareholder of Isla, valued at
approximately $1.3 million. These shares were issued in connection with the purchase price from our
acquisition of Isla in December 2011.
In May 2012, we issued 142,489 shares of common stock to the former shareholders of ALBS, valued at
approximately $0.3 million. These shares were issued in connection with the purchase price from our
acquisition of ALBS in February 2012.
In May 2012, we issued 20,130 shares of common stock in connection with the exercise of stock options.
PH2 1076319v1 10/03/12
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We did not utilize or engage a principal underwriter in connection with any of the above securities transactions. The
above securities were only offered and sold to “accredited investors” as that term is defined in Rule 501 of
Regulation D, promulgated under the Securities Act of 1933, as amended. Management believes the above shares of
common stock were issued pursuant to the exemption from registration under Section 4(2) of the Securities Act of
1933, as amended.
ITEM 6. SELECTED FINANCIAL DATA
Not applicable.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and result of operations should be read in
conjunction with the consolidated financial statements and the related notes and other information included
elsewhere in this report.
Overview
We are a non-asset based transportation and logistics services company providing customers domestic and
international freight forwarding services and other value added supply chain management services, including order
fulfillment, inventory management and warehousing.
We are executing a strategy to expand our operations through a combination of organic growth and the strategic
acquisition of non-asset based transportation and logistics providers meeting our acquisition criteria.
Our first acquisition of Airgroup Corporation ("Airgroup") was completed on January 1, 2006. Airgroup,
headquartered in Bellevue, Washington, is a non-asset based logistics company providing domestic and international
freight forwarding services through a network of independent agent offices across North America.
We continue to seek additional companies as suitable acquisition candidates and have completed five material
acquisitions since our acquisition of Airgroup. In November 2007, we acquired certain assets of Automotive
Services Group in Detroit, Michigan to service the automotive industry. In September 2008, we acquired Adcom
Express, Inc. d/b/a Adcom Worldwide ("Adcom"), adding an additional 30 locations across North America and
augmenting our overall domestic and international freight forwarding capabilities. In April 2011, we acquired DBA
Distribution Services, Inc., d/b/a Distribution by Air ("DBA"), adding an additional 26 locations across North
America, further expanding our physical network and service capabilities. In December 2011, we acquired the assets
and operations of Laredo, Texas based Isla International Ltd, (“Isla”) to serve as our gateway to Mexico. In February
2012, we acquired the assets and operations of New York-JFK based Brunswicks Logistics, Inc. d/b/a ALBS
Logistics, Inc. (“ALBS”), a strategic location for domestic and international logistics services.
In connection with our 2008 acquisition of Adcom, the Company changed the name of Airgroup Corporation to
Radiant Global Logistics, Inc. ("RGL") to better position our centralized back-office operations to service our multi-
brand network. Today, RGL, through the Radiant, Airgroup, Adcom and DBA network brands, has a diversified
account base including manufacturers, distributors and retailers using a network of independent carriers through a
combination of strategically positioned, company owned and independent agent offices.
Our growth strategy will continue to focus on both organic growth and growth through acquisitions. For organic
growth, we will focus on strengthening and retaining existing, and expanding new customer agency relationships.
Since our acquisition of Airgroup in January 2006, we have focused our efforts on the build-out of our network of
independent agency offices, as well as enhancing our back-office infrastructure, transportation and accounting
systems. We also continue to search for targets that fit within our acquisition criteria.
Performance Metrics
Our principal source of income is derived from freight forwarding services. As a freight forwarder, we arrange for
the shipment of our customers’ freight from point of origin to point of destination. Generally, we quote our
customers a turnkey cost for the movement of their freight. Our price quote will often depend upon the customer’s
time-definite needs (first day through fifth day delivery), special handling needs (heavy equipment, delicate items,
environmentally sensitive goods, electronic components, etc.), and the means of transport (motor carrier, air, ocean
or rail). In turn, we assume the responsibility for arranging and paying for the underlying means of transportation.
PH2 1076319v1 10/03/12
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Our transportation revenue represents the total dollar value of services we sell to our customers. Our cost of
transportation includes direct costs of transportation, including motor carrier, air, ocean and rail services. We act
principally as the service provider to add value in the execution and procurement of these services to our customers.
Our net transportation revenue (gross transportation revenue less the direct cost of transportation) is the primary
indicator of our ability to source, add value and resell services provided by third parties, and is considered by
management to be a key performance measure. In addition, management believes measuring its operating costs as a
function of net transportation revenue provides a useful metric, as our ability to control costs as a function of net
transportation revenue directly impacts operating earnings.
Our operating results will be affected as acquisitions occur. Since all acquisitions are made using the purchase
method of accounting for business combinations, our financial statements will only include the results of operations
and cash flows of acquired companies for periods subsequent to the date of acquisition.
Our GAAP-based net income will be affected by non-cash charges relating to the amortization of customer related
intangible assets and other intangible assets attributable to completed acquisitions. Under applicable accounting
standards, purchasers are required to allocate the total consideration in a business combination to the identified
assets acquired and liabilities assumed based on their fair values at the time of acquisition. The excess of the
consideration paid over the fair value of the identifiable net assets acquired is to be allocated to goodwill, which is
tested at least annually for impairment. Applicable accounting standards require that we separately account for and
value certain identifiable intangible assets based on the unique facts and circumstances of each acquisition. As a
result of our acquisition strategy, our net income (loss) will include material non-cash charges relating to the
amortization of customer related intangible assets and other intangible assets acquired in our acquisitions. Although
these charges may increase as we complete more acquisitions, we believe we will be growing the value of our
intangible assets (e.g., customer relationships). Thus, we believe that earnings before interest, taxes, depreciation
and amortization, or EBITDA, is a useful financial measure for investors because it eliminates the effect of these
non-cash costs and provides an important metric for our business.
Further, the financial covenants of our Credit Facility are measured against adjusted EBITDA which excludes costs
related to share-based compensation expense, change in contingent consideration, extraordinary items and other
non-cash charges.
Our compliance with the financial covenants of our borrowing arrangements is particularly important given the
materiality of these facilities to our day-to-day operations and overall acquisition strategy. Our debt capacity, subject
to the requisite collateral at an advance rate of 80% of eligible domestic accounts receivable and up to 60% of
eligible foreign receivables, is limited to a multiple of our consolidated EBITDA (as adjusted) as measured on a
rolling four quarter basis. If we fail to comply with these covenants and are unable to secure a waiver or other relief,
our financial condition would be materiality weakened and our ability to fund day-to-day operations would be
materially and adversely affected. Accordingly, we intend to employ EBITDA and adjusted EBITDA as
management tools to measure our historical financial performance and as a benchmark for future financial
flexibility.
Our operating results are also subject to seasonal trends when measured on a quarterly basis. The impact of
seasonality on our business will depend on numerous factors, including the markets in which we operate, holiday
seasons, consumer demand and economic conditions. Since our revenue is largely derived from customers whose
shipments are dependent upon consumer demand and just-in-time production schedules, the timing of our revenue is
often beyond our control. Factors such as shifting demand for retail goods and/or manufacturing production delays
could unexpectedly affect the timing of our revenue. As we increase the scale of our operations, seasonal trends in
one area of our business may be offset to an extent by opposite trends in another area. We cannot accurately predict
the timing of these factors, nor can we accurately estimate the impact of any particular factor, and thus we can give
no assurance any historical seasonal patterns will continue in future periods.
Critical Accounting Policies
Accounting policies, methods and estimates are an integral part of the consolidated financial statements prepared by
management and are based upon management’s current judgments. These judgments are normally based on
knowledge and experience regarding to past and current events and assumptions about future events. Certain
accounting policies, methods and estimates are particularly sensitive because of their significance to the financial
statements and because of the possibility that future events affecting them may differ from management’s current
judgments. While there are a number of accounting policies, methods and estimates that affect our financial
statements, the areas that are particularly significant include revenue recognition, accruals for the cost of purchased
transportation, the fair value of acquired assets and liabilities, changes in contingent consideration, accounting for
PH2 1076319v1 10/03/12
20
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.
We perform an annual impairment test for goodwill. The first step of the impairment test requires us to determine
the fair value of each reporting unit, and compare the fair value to the reporting unit's carrying amount. We have
only one reporting unit. 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 we 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. We typically perform our
annual impairment test effective as of April 1 of each year, unless events or circumstances indicate, an impairment
may have occurred before that time.
Acquired intangibles consist of customer related intangibles and non-compete agreements arising from our
acquisitions. Customer related intangibles are amortized using accelerated methods over approximately five years
and non-compete agreements are amortized using the straight line method over the term of the underlying
agreements.
We review 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, we estimate 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.
As a non-asset based carrier we do not own transportation assets. We generate the major portion of its air and ocean
freight revenues by purchasing transportation services from direct (asset-based) carriers and reselling those services
to our customers. Based upon the terms in the contract of carriage, revenues related to shipments where we issue a
House Airway Bill or a House Ocean Bill of Lading are recognized at the time the freight is tendered to the direct
carrier at origin. Costs related to the shipments are also recognized at this same time based upon anticipated
margins, contractual arrangements with direct carriers, and other known factors. The estimates are routinely
monitored and compared to actual invoiced costs. The estimates are adjusted as deemed necessary by us to reflect
differences between the original accruals and actual costs of purchased transportation.
This method generally results in recognition of revenues and purchased transportation costs earlier than the preferred
methods under GAAP which do not recognize revenue until a proof of delivery is received or which recognize
revenue as progress on the transit is made. Our method of revenue and cost recognition does not result in a material
difference from amounts that would be reported under such other methods.
Results of Operations
Basis of Presentation
The results of operations discussion that appears below has been presented utilizing a combination of historical and,
where relevant, pro forma unaudited information to include the effects on our consolidated financial statements of
our acquisitions of DBA, Isla, and ALBS. The pro forma results are developed to reflect a consolidation of the
historical results of operations of the Company and adjusted to include the historical results of DBA, Isla, and
ALBS, as if we had acquired all of them as of July 1, 2010. The pro forma results are also adjusted to reflect a
consolidation of the historical results of operations of DBA, Isla, ALBS, and the Company as adjusted to reflect the
amortization of acquired intangibles and are also provided in the Financial Statements included within this report.
The pro forma financial data is not necessarily indicative of results of operations that would have occurred had this
acquisition been consummated at the beginning of the periods presented or which might be attained in the future.
Fiscal year ended June 30, 2012, compared to fiscal year ended June 30, 2011
We generated transportation revenue of $297.0 million and net transportation revenue of $84.7 million for the year
ended June 30, 2012, as compared to transportation revenue of $203.8 million and net transportation revenue of
$62.5 million for the year ended June 30, 2011. Net income was $1.9 million for the year ended June 30, 2012,
compared to net income of $2.9 million for the year ended June 30, 2011.
PH2 1076319v1 10/03/12
21
We had adjusted EBITDA of $7.5 million and $6.8 million for years ended June 30, 2012 and 2011, respectively.
EBITDA is a non-GAAP measure of income and does not include the effects of interest and taxes, and excludes the
"non-cash" effects of depreciation and amortization on long-term assets. Companies have some discretion as to
which elements of depreciation and amortization are excluded in the EBITDA calculation. We exclude all
depreciation charges related to furniture and equipment, all amortization charges, including amortization of
leasehold improvements and other intangible assets. We then further adjust EBITDA to exclude changes in
contingent consideration, expenses specifically attributable to acquisitions, extraordinary items, costs related to
share-based compensation expense, and other non-cash charges consistent with the financial covenants of our Credit
Facility . Our ability to generate adjusted EBITDA ultimately limits the amount of debt that we may carry and is a
good indicator of our financial flexibility and capacity to complete additional acquisitions in compliance with the
credit agreement. A violation of this covenant in the Credit Facility would greatly limit our financial flexibility,
reduce available liquidity, and absent a waiver, could give rise to an event of default under the Credit Facility. For
the forgoing reasons, we believe that the Credit Facility is material to our operations and that adjusted EBITDA is
important to an evaluation of our financial condition and liquidity. While management considers EBITDA and
adjusted EBITDA useful in analyzing our results, it is not intended to replace any presentation included in our
consolidated financial statements.
The following table provides a reconciliation for the fiscal years ended June 30, 2012 and 2011 of adjusted
EBITDA to net income, the most directly comparable GAAP measure in accordance with SEC Regulation G (in
thousands):
Years ended June 30,
Change
2012
2011
Amount
Percent
Net income
Income tax expense
Net interest expense
Depreciation and amortization
$
$
1,901
1,475
1,250
3,143
2,852 $
2,025
207
1,325
(951)
(550)
1,043
1,818
EBITDA
$
7,769
$
6,409 $
1,360
Share-based compensation and
other non-cash costs
Change in contingent
consideration
Expenses specifically
attributable to acquisitions
Loss on litigation settlement
Adjusted EBITDA
$
226
(900)
424
-
7,519
$
125
101
-
(900)
139
150
6,823 $
285
(150)
696
(33.3) %
(27.2) %
503.9 %
137.2 %
21.2 %
80.8 %
NM
205.0 %
(100.0) %
(1)
Includes $1,018,000 in non-recurring transition costs associated with the Company’s acquisition of
DBA, and an additional $518,000 in nonrecurring legal expenses for fiscal year ended June 30, 2012
and $583,000 in nonrecurring transition costs associated with the Company’s acquisition of DBA for
fiscal year ended June 30, 2011. Excluding these non-recurring costs, the Company would have
reported $9,055,000 in adjusted EBITDA for the year ended June 30, 2012, for an increase of
$1,649,000, or an increase of 22.3%.
The following table summarizes transportation revenue, cost of transportation and net transportation revenue (in
thousands) for the fiscal years ended June 30, 2012 and 2011:
Years ended June 30,
2012
2011
Change
Amount
Percent
Transportation revenue
Cost of transportation
$
297,003 $
212,294
203,820
141,315
$
93,183
70,979
45.7 %
50.2 %
Net transportation revenue
$
Net transportation margins
We generated transportation revenue of $297.0 million and net transportation revenue of $84.8 million for the year
ended June 30, 2012, as compared to transportation revenue of $203.8 million and net transportation revenue of
84,709 $
28.5 %
62,505
$
30.7 %
22,204
35.5 %
PH2 1076319v1 10/03/12
22
$62.5 million for the year ended June 30, 2011. Domestic and international transportation revenue was $179.9
million and $117.1 million, respectively, for the year ended June 30, 2012, compared with $113.9 million and $89.9
million, respectively, for the year ended June 30, 2011. These increases in revenue are due principally to incremental
revenues attributed to our acquisitions of DBA, Isla, and ALBS.
Cost of transportation was 71.5% and 69.3% of transportation revenue for the years ended June 30, 2012 and 2011,
respectively. Net transportation margins were 28.5% and 30.7% of transportation revenue for the years ended June
30, 2012 and 2011, respectively. The nominal margin regression was attributable to differing product mixes of
shipments and services throughout the fiscal year with slightly lower margin characteristics.
The following table compares condensed consolidated statement of income data as a percentage of our net
transportation revenue (in thousands) for the fiscal years ended June 30, 2012 and 2011:
Years ended June 30,
2012
Amount Percent
2011
Amount Percent
Change
Amount Percent
Net transportation
revenue
Agent commissions
Personnel costs
Selling, general and
administrative
Depreciation and
amortization
Transition costs
Change in contingent
consideration
$
84,709
100.0 % $
62,505
100.0 % $
22,204
35.5 %
52,427
13,192
61.9 %
15.6 %
42,353
7,734
67.8 %
12.4 %
10,074
5,458
23.8 %
70.6 %
11,348
13.4 %
5,335
8.5 %
6,013
112.7 %
3,143
1,018
3.7 %
1.2 %
1,325
583
2.1 %
0.9 %
1,818
435
137.2 %
74.6 %
(900)
(1.1) %
-
0.0 %
(900)
NM %
Total operating costs
80,228
94.7 %
57,330
91.7 %
22,898
39.9 %
Income from
operations
Other expense
Income before income
taxes and non-
controlling interest
Income tax expense
Income before non-
controlling interest
Non-controlling
interest
4,481
(927)
5.3 %
(1.1) %
5,175
(139)
8.3 %
(0.2) %
(694)
(788)
(13.4) %
566.9 %
3,554
(1,475)
4.2 %
(1.8) %
5,036
(2,025)
8.1 %
(3.3) %
(1,482)
550
(29.4) %
(27.2) %
2,079
2.4 %
3,011
4.8 %
(932 )
(31.0) %
(178)
(0.1) %
(159)
(0.2) %
(19)
11.9 %
Net income
$
1,901
2.2 % $
2,852
4.6 % $
(951)
(33.3) %
PH2 1076319v1 10/03/12
23
Agent commissions were $52.4 million for the year ended June 30, 2012, an increase of 23.8% from $42.4 million
for the year ended June 30, 2011. The increase is primarily attributable to the addition of DBA agent-based offices
in April 2011. As a percentage of net revenues, agent commissions decreased to 61.9% for the year ended June 30,
2012, from 67.8% for the year ended June 30, 2011. This decrease is a result of our recent acquisitions of DBA, Isla,
and ALBS, which added company-owned operations in Newark, Los Angeles, Laredo, and New York-JFK where
commissions are not payable.
Personnel costs consist of payroll, payroll taxes, benefits and stock compensation expense. Personnel costs were
$13.1 million for the year ended June 30, 2012, an increase of 70.6% from $7.7 million for the year ended June 30,
2011. The increase is primarily attributable to our acquisitions of DBA, Isla, and ALBS, which added the personnel
costs associated with the new company-owned operations in Newark, Los Angeles, Laredo, and New York-JFK. As
a percentage of net revenues, personnel costs increased to 15.6% for the year ended June 30, 2012, from 12.4% for
the year ended June 30, 2011.
Selling, general and administrative ("SG&A") costs consist primarily of marketing, rent, professional services,
insurance and travel expenses. SG&A costs were $11.3 million for the year ended June 30, 2012, an increase of
112.7% from $5.3 million for the year ended June 30, 2011. The increase is primarily attributable to our acquisitions
of DBA, Isla, and ALBS which added costs associated with the new company-owned operations in Newark, Los
Angeles, Laredo, and New York-JFK, combined with non-recurring legal expenses incurred in connection with the
Isla and ALBS transactions and the on-going dispute with the selling shareholders of DBA. As a percentage of net
revenues, SG&A costs increased to 13.4% for the year ended June 30, 2012, from 8.5% for the year ended June 30,
2011.
Depreciation and amortization costs were $3.1 million for the year ended June 30, 2012, an increase of 137.2% from
$1.3 million for the year ended June 30, 2011. The increase is primarily due to amortization costs associated with
the intangibles our acquisitions of DBA, Isla, and ALBS. As a percentage of net revenues, depreciation and
amortization increased to 3.7% for the year ended June 30, 2012 from 2.1% for the year ended June 30, 2011.
Transition costs represent non-recurring operating costs incurred in connection with our acquisition of DBA and
totaled $1.0 million for the year ended June 30, 2012, an increase of 74.6% from $0.6 million for the year ended
June 30, 2011. As a percentage of net revenues, non-recurring transition costs increased to 1.2% for the year ended
June 30, 2012, from 0.9% for the year ended June 30, 2011.
Change in contingent consideration represents the change in the fair value of contingent consideration due to former
shareholders of acquired operations and totaled income of $0.9 million for the year ended June 30, 2012. There were
no such costs during the comparable prior period. As a percentage of net revenues, the change in contingent
consideration was 1.1% for the year ended June 30, 2012.
Income from operations was $4.5 million for the year ended June 30, 2012, compared to income from operations of
$5.2 million for the year ended June 30, 2011.
Other expense was $0.9 million for the year ended June 30, 2012, as compared to other expense of $0.1 million
during year ended June 30, 2011. The increase is primarily associated with interest expense incurred with our
acquisitions of DBA, Isla, and ALBS. As a percentage of net revenues, other expense was 1.1% for the year ended
June 30, 2012, up from 0.2% for the year ended June 30, 2011.
Our net income was $1.9 million for the year ended June 30, 2012, reflecting a 33.3% decrease in results of less than
$1.0 million as compared to net income of $2.9 million for the year ended June 30, 2011, driven principally by the
increased amortization of intangibles resulting from our recent acquisition activities offset partially by the change
from contingent consideration and from the non-recurring items identified below. Our net income for the current
year also reflected a decrease in results of operations related to greater transition costs associated with the DBA
transaction for the current year as compared to the prior year period, which had only one quarter of transition costs.
Although we do not believe the deterioration in GAAP-based earnings is reflective of the true earnings power of the
business, our near-term earnings have and will continue to be negatively impacted as a result of these incremental
non-cash charges and other non-recurring costs including, lost revenue experienced by our Los Angeles DBA office,
and the legal expenses incurred in connection with the legal proceedings relating to the DBA acquisition, although it
is our expectation that some or all of these amounts may be recoverable in our claims brought against the former
DBA shareholders.
PH2 1076319v1 10/03/12
24
Supplemental Pro forma Information
The following table provides a reconciliation for the fiscal years ended June 30, 2012 and 2011 (pro forma and
unaudited) of adjusted EBITDA to net income, the most directly comparable GAAP measure in accordance with
SEC Regulation G (in thousands):
Years ended June 30,
Change
2012
2011
Amount
Percent
$
Net income
Income tax expense
Net interest expense
Depreciation and
amortization
2,712
1,972
1,854
4,299
$ 3,530
2,675
1,739
$ (818)
(703)
115
4,075
224
EBITDA
$
10,837
$ 12,019
$ (1,182)
Share-based compensation
and other non-cash costs
Change in contingent
consideration
Expenses specifically
attributable to
acquisitions
Loss on litigation
settlement
Adjusted EBITDA
226
(900)
424
124
-
139
102
(900)
285
205.0 %
-
10,587
150
$ 12,432
(150)
$ (1,845)
(100.0) %
(14.8) %
$
(23.2) %
(26.3) %
6.6 %
5.5 %
(9.8) %
82.3 %
NM
The following table summarizes transportation revenue, cost of transportation and net transportation revenue (in
thousands) for the fiscal years ended June 30, 2012 and 2011 (pro forma and unaudited):
Years ended June 30,
Change
2012
2011
Amount
Percent
Transportation revenue
Cost of transportation
$
323,912
232,527
$
324,109
226,321
$ (197)
6,206
Net transportation revenue $
Net transportation margins
91,385
$
28.2 %
97,788
30.2
$ (6,403)
(0.1) %
2.7 %
(6.5) %
Transportation revenue was $323.9 million for the year ended June 30, 2012, a decrease of 0.1% from $324.1
million for the year ended June 30, 2011.
Cost of transportation was $232.5 million for the year ended June 30, 2012, an increase of 2.7% from $226.3 million
for the year ended June 30, 2011.
Net transportation margins decreased to 28.2% for the year ended June 30, 2012, compared to 30.2% for the year
ended June 30, 2011.
25
The following table compares certain condensed consolidated statement of income data as a percentage of our
net transportation revenue (in thousands) for the fiscal years ended June 30, 2012 and 2011 (pro forma and
unaudited):
Years ended June 30,
2012
2011
Change
Amount
Percent
Amount
Percent
Amount
Percent
Net transportation revenue $
91,385
100.0 % $
97,788
100.0 % $
(6,403)
(6.5) %
Agent commissions
Personnel costs
Selling, general and
administrative
Depreciation and
amortization
Transition costs associated
with DBA acquisition
Change in contingent
consideration
52,427
15,322
57.4 %
16.8 %
58,015
16,345
59.3 %
16.7 %
(5,588)
(1,023)
12,827
14.0 %
10,807
11.1 %
2,020
4,299
4.7 %
4,075
1,018
1.1 %
583
4.2 %
0.6 %
224
435
(9.6) %
(6.3) %
18.7 %
5.5 %
74.6 %
(900)
(1.0%)
-
0.0 %
(900)
NM
Total operating costs
84,993
93.0 %
89,825
91.9 %
(4,832)
(5.4) %
Income from operations
Other expense
6,392
(1,530)
7.0 %
(1.7) %
7,963
(1,599)
8.1 %
(1.6) %
(1,571)
69
(19.7) %
(4.3) %
Income before income taxes
and non-controlling
interest
Income tax expense
Income before non-
controlling interest
Non-controlling interest
4,862
(1,972)
2,890
(178)
5.3 %
(2.1) %
6,364
(2,675)
3.2 %
(0.2) %
3,689
(159)
6.5 %
(2.7) %
3.8 %
(0.2) %
(1,502)
703
(799)
(19)
(23.6) %
(26.3) %
(21.7) %
11.9 %
Net income
$
2,712
3.0 % $
3,530
3.6 % $
(818)
(23.2) %
Agent commissions were $52.4 million for the year ended June 30, 2012, a decrease of 9.6% from $58.0 million for
the year ended June 30, 2011. Agent commissions as a percentage of net transportation revenue decreased to 57.4%
of net transportation revenue the year ended June 30, 2012, compared to 59.3% for the comparable prior year period.
Personnel costs were $15.3 million for the year ended June 30, 2012, a decrease of 6.3% from $16.3 million for the
year ended June 30, 2011. Personnel costs as a percentage of net transportation revenue were 16.8% for the year
ended June 30, 2012, an increase from 16.7% for the comparable prior year period.
SG&A costs were $12.8 million for the year ended June 30, 2012, an increase of 18.7% from $10.8 million for the
year ended June 30, 2011. As a percentage of net transportation revenue, SG&A costs increased to 14.0% for the
year ended June 30, 2012, from 11.1% for the comparable prior year period.
Depreciation and amortization costs were $4.3 million for the year ended June 30, 2012, an increase of 5.5% from
$4.1 million for the year ended June 30, 2011. Depreciation and amortization as a percentage of net transportation
revenue increased to 4.7% for the year ended June 30, 2012, from 4.2% for the comparable prior year period.
Transition costs associated with DBA acquisition were $1.0 million for the year ended June 30, 2012, an increase of
74.6% from $.6 million for the year ended June 30, 2011. As a percentage of net transportation revenue, non-
recurring transition costs increased to 1.1% for the year ended June 30, 2012, from 0.6% for the year ended June 30,
2012.
Change in contingent consideration was $0.9 million for the year ended June 30, 2012. There were no such costs
during the comparable prior period.
PH2 1076319v1 10/03/12
26
Income from operations was $6.4 million for the year ended June 30, 2012, compared to income from operations of
$8.0 million for the year ended June 30, 2011.
Other expense was $1.5 million for the year ended June 30, 2012, compared to other income of $1.6 million for the
year ended June 30, 2011.
Net income was $2.7 million for the year ended June 30, 2012, compared to net income of $3.5 million for the year
ended June 30, 2011.
Liquidity and Capital Resources
Net cash provided by operating activities for the year ended June 30, 2012 was $1.8 million, compared to net cash
provided by operating activities for the year ended June 30, 2011 of $2.9 million. The change was principally driven
by a decrease in our net income.
Net cash used for investing activities was $11.5 million for the year ended June 30, 2012, compared to $5.4 million
for the year ended June 30, 2011. Use of cash in 2012 consisted of $7.7 million related to the acquisition of Isla,
$2.6 million related to the purchase of ALBS, the purchase of $0.7 million of fixed assets, and $0.5 million paid in
earn-outs to the former shareholders of acquired operations. Use of cash in 2011 consisted of $5.4 million for the
acquisition of DBA (less cash acquired of $2.0 million), an additional $0.4 million for furniture and equipment, and
$1.6 million paid to the former shareholders of acquired operations.
Net cash provided by financing activities for the year ended June 30, 2012 was $9.4 million compared to $2.2
million for the year ended June 30, 2011. Cash from financing activities in 2012 consisted of proceeds from our
Credit Facility of $1.2 million and proceeds from the issuance of debt to Caltius of $9.4 million, repayments of notes
payable to former shareholders of $0.9 million, $0.2 million in non-controlling interest distributions, and $0.1
million of costs of the shelf registration. Use of cash for 2011 consisted of proceeds from our Credit Facility of $2.6
million and proceeds from sales of Company stock to DBA offices of $0.2 million, which amounts were offset by
$0.5 million used to purchase shares of our common stock and $0.1 million in non-controlling interest distributions.
Recent Acquisitions
Below are descriptions of recent material acquisitions including a breakdown of consideration paid at closing and
future potential earn-out payments. We define "material acquisitions" as those with aggregate potential
consideration of $1.0 million or more.
Effective September 1, 2008, we acquired all of the outstanding stock of Adcom Express, Inc. The transaction was
valued at up to $11.05 million, consisting of: (i) $4.75 million in cash paid at the closing; (ii) $0.25 million in cash
payable shortly after the closing, subject to adjustment, based upon the working capital of Adcom as of August 31,
2008; (iii) up to $2.8 million in four "Tier-1 Earn-Out Payments" of up to $0.7 million each, covering the four year
earn-out period through 2012, based upon Adcom achieving certain levels of "Gross Profit Contribution" (as defined
in the agreement), payable 50% in cash and 50% in shares of our common stock (valued at delivery date); (iv) a
"Tier-2 Earn-Out Payment" of up to a maximum of $2.0 million, equal to 20% of the amount by which the Adcom
cumulative Gross Profit Contribution exceeds $16.56 million during the four year earn-out period; and (v) an
"Integration Payment" of $1.25 million payable on the earlier of the date certain integration targets are achieved or
18 months after the closing, payable 50% in cash and 50% in our shares of our common stock (valued at delivery
date).
Through the final earn-out period of June 30, 2012, the former Adcom shareholders earned a total of $2,318,365 in
base earn-out payments. Of this amount, $887,083 was paid in cash and $567,058 was settled in stock through the
year ended June 30, 2012. The remaining amount of $864,224 is included in the amount due to former shareholders
of acquired operations as of June 30, 2012.
On April 6, 2011, we closed on an Agreement and Plan of Merger (the "DBA Agreement") pursuant to which we
acquired DBA Distribution Services, Inc. ("DBA"), a privately-held New Jersey corporation founded in 1981. At the
time of the acquisition DBA serviced a diversified account base including manufacturers, distributors and retailers
through a combination of company-owned logistics offices located in Somerset, New Jersey and Los Angeles,
California and twenty-four agency offices located across North America. For financial accounting purposes, the
transaction was deemed to be effective as of April 1, 2011. The shares of DBA were acquired by the Company via a
merger transaction pursuant to which DBA was merged into a newly-formed subsidiary of the Company. The $12.0
million purchase price consisted of $5.4 million paid in cash at closing, the delivery of $4.8 million in Company
notes (payable in principal installments of $1.6 million on the anniversary date over the next three years plus interest
PH2 1076319v1 10/03/12
27
at a rate of 6.5% per annum) and $1.8 million payable in cash in connection with the achievement of certain
integration milestones to be paid within 180 days after the milestones have been achieved; however, no later than the
18th month following the closing. In May 2011, the Company elected to satisfy $2.4 million of the Company notes
through the issuance of 1,071,429 shares of the Company's common stock. Of the remaining notes payable,
$865,816 was paid during the year ended June 30, 2012, and $767,092 is payable during each of the years ending
June 30, 2013 and 2014. The remaining Company notes may be subject to acceleration upon occurrence of a
“Corporate Transaction” (as defined in notes), which includes a future sale of DBA or the Company, or certain
changes in corporate control.
Founded in 1981, DBA services a diversified account base including manufacturers, distributors and retailers
through a combination of company-owned logistics centers located in Somerset, New Jersey and Los Angeles,
California and twenty-three agency offices across North America.
On December 1, 2011, we acquired substantially all of the assets of Laredo, Texas based Isla International, Ltd.
("Isla"), a privately-held company founded in 1996. At the time of the acquisition, Isla provided bilingual expertise
in both north and south bound cross-border transportation and logistics services to a diversified account base
including manufacturers in the automotive, appliance, electronics and consumer packaged goods industries from its
strategically-aligned location in Laredo, Texas and will serve as our gateway to the Mexico markets. The transaction
was structured as an asset purchase and valued at up to approximately $15.0 million, consisting of: (i) cash of
$7.657 million paid at closing; (ii) $1.325 million paid through the issuance of 552,333 shares of our restricted stock
on the three-month anniversary of the closing (valued based upon a 30-day volume weighted average price
calculated preceding the delivery of the shares); (iii) up to $3.975 million in aggregate "Tier-1 Earn-Out Payments"
covering the four-year earn-out period immediately following closing, based upon the acquired Isla business unit
generating a "Modified Gross Profit Contribution" (as defined within the Asset Purchase Agreement) of $6.928
million for each twelve month earn-out period following closing; and (iv) a "Tier-2 Earn-Out Payment" after the
fourth anniversary of the closing, equal to 20% of the amount by which the aggregate "Modified Gross Profit
Contribution" of the acquired Isla business unit during the four-year earn-out period exceeds $27.711 million, with
such payment not to exceed $2.0 million. The various Tier-1 Earn-Out Payments and the Tier-2 Earn-Out Payment
shall be made in a combination of cash and our common stock, as we may, at our sole discretion, elect to satisfy up
to 25% of each of the earn-out payments through the issuance of our common stock valued based upon a 30-day
volume weighted average price to be calculated preceding the delivery of the shares.
On February 27, 2012, through a wholly-owned subsidiary, RGL, the Company acquired substantially all of the
assets of New York based Brunswicks Logistics, Inc. d/b/a ALBS Logistics Company ("ALBS"), a privately-held
company founded in 1997. At the time of the acquisition, ALBS provided a full range of domestic and international
transportation and logistics services across North America to a diversified account base including manufacturers,
distributors and retailers from its strategic international gateway location at New York-JFK airport. The transaction
was structured as an asset purchase and valued at up to approximately $7.275 million, consisting of: (i) cash of
$2.655 million paid at closing, (ii) $295,000 paid through the issuance of 142,489 shares of our restricted stock on
the three-month anniversary of the closing (valued based upon a 30-day volume weighted average price calculated
preceding the delivery of the shares); (iii) up to $3.325 million in aggregate "Tier-1 Earn-Out Payments" covering
the four-year earn-out period immediately following closing; and (iv) a "Tier-2 Earn-Out Payment" after the fourth
anniversary of the closing, with such payment not to exceed $1.0 million.
Credit Facility
In December 2011, we amended and restated our Credit Facility in connection with the acquisition of Isla to
accommodate the addition of subordinated debt by Caltius. The Credit Facility consists of a $20.0 million revolving
credit facility, including a $1.0 million sublimit to support letters of credit and matures on November 30, 2013. The
Credit Facility is collateralized by accounts receivable and other assets of the Company and its subsidiaries.
Advances under the Facility are available to fund future acquisitions, capital expenditures or for other corporate
purposes Borrowings under the Credit Facility accrue interest, at the Company’s option, at the bank’s prime rate
minus 0.75% to plus 0.50% or LIBOR plus 1.75% to 3.00%, and can be adjusted up or down during the term of the
Credit Facility based on our performance relative to certain financial covenants. The Credit Facility is collateralized
by accounts receivable and other assets of the Company and its subsidiaries and provides for advances of up to 80%
of eligible domestic accounts receivable and for advances of up to 60% of eligible foreign accounts receivable.
The terms of the Credit Facility are subject to certain financial and operational covenants which may limit the
amount otherwise available under the Credit Facility. The first financial covenant limits our ratio of “Funded Debt”
(as defined therein) to consolidated EBITDA (as adjusted) and measured on a rolling four quarter basis to 4.00 to 1,
reducing to 3.75 to 1 at December 31, 2012, reducing to 3.5 to 1 at December 31, 2013 and reducing to 3.25 to 1 at
December 31, 2014. The second financial covenant limits our ratio of Senior Debt (defined as amounts borrowed
PH2 1076319v1 10/03/12
28
from BofA) to consolidated EBITDA (as adjusted) and measured on a rolling four quarter basis to 2.50 to 1 and
reducing to 2.25 to 1 on December 31, 2012. The third financial covenant requires that we maintain a basic fixed
charge coverage ratio of at least 1.25 to 1.0. The fourth financial covenant is a minimum profitability standard that
requires us not to incur a net loss before taxes, amortization of acquired intangibles and extraordinary items in any
two consecutive quarterly accounting periods.
The co-borrowers of the Credit Facility include Radiant Logistics, Inc., RGL (f/k/a Airgroup Corporation), Adcom
Express, Inc. (d/b/a Adcom Worldwide), DBA (d/b/a Distribution by Air), Radiant Transportation Services ("RTS",
f/k/a Radiant Logistics Global Services, Inc.), and RLP. RLP is owned 40% by RGL and 60% by RCP, an affiliate
of the Company’s Chief Executive Officer. RLP has been certified as a minority business enterprise, and focuses on
corporate and government accounts with diversity initiatives. As a co-borrower under the Credit Facility, the
accounts receivable of RLP are eligible for inclusion within the overall borrowing base of the Company and all
borrowers will be responsible for repayment of the debt associated with advances under the Credit Facility,
including those advanced to RLP. At June 30, 2012, we were in compliance with all of its covenants.
As of August 31, 2012, we have approximately $9.6 million in remaining availability under the Credit Facility to
support future acquisitions and our on-going working capital requirements. We expect to structure acquisitions with
certain amounts paid at closing, and the balance paid over a number of years in the form of earn-out installments
which are payable based upon the future earnings of the acquired businesses payable in cash, stock or some
combination thereof. As we continue to execute our acquisition strategy, we will be required to make significant
payments in the future if the earn-out installments under our various acquisitions become due. While we believe that
a portion of any required cash payments will be generated by the acquired businesses, we may have to secure
additional sources of capital to fund the remainder of any cash-based earn-out payments as they become due. This
presents us with certain business risks relative to the availability of capacity under our Facility, the availability and
pricing of future fund raising, as well as the potential dilution to our stockholders to the extent the earn-outs are
satisfied directly, or indirectly, from the sale of equity.
For additional information regarding the Credit Facility, see Note 13 to our consolidated financial statements
contained elsewhere in this report.
Given our continued focus on the build-out of our network of agency locations, we believe that our current working
capital and anticipated cash flow from operations are adequate to fund existing operations for the next 12 months.
However, continued growth through strategic acquisitions, will require additional sources of financing as our
existing working capital is not sufficient to finance our operations and an acquisition program. Thus, our ability to
finance future acquisitions will be limited by the availability of additional capital. We may, however, finance
acquisitions using our common stock as all or some portion of the consideration. In the event that our common stock
does not attain or maintain a sufficient market value or potential acquisition candidates are otherwise unwilling to
accept our securities as part of the purchase price for the sale of their businesses, we may be required to utilize more
of our cash resources, if available, in order to continue our acquisition program. If we do not have sufficient cash
resources through either operations or from debt facilities, our growth could be limited unless we are able to obtain
such additional capital.
Caltius Senior Subordinated Notes
In connection with our acquisition of Isla, effective as of December 1, 2011, we entered into an Investment
Agreement with Caltius. Under the Investment Agreement, Caltius provided the Company with a $10.0 million
aggregate principal amount evidenced by the issuance of the Senior Subordinated Notes, the net proceeds of which
were primarily used to finance the cash payments due at closing of the Isla transaction. The Senior Subordinated
Notes accrue interest at the rate of 13.5% per annum (the "Accrual Rate"), and must be paid currently in cash on a
quarterly basis at a rate of 11.75% per annum (the "Pay Rate"). The outstanding principal balance of the Senior
Subordinated Notes will be increased by an amount (the "PIK Amount") equal to the difference between interest
accrued at the Accrual Rate and Interest Accrued at the Pay Rate unless the Company makes an election to pay the
PIK Amount in cash. We have exercised our option to pay all PIK in cash. The Senior Subordinated Notes are non-
amortizing, with all principal due upon maturity at December 1, 2016.
Under the Investment Agreement, we also issued 500,000 restricted shares our common stock to Caltius.
For additional information regarding the Caltius Financing, see Note 13 to our consolidated financial statements
contained elsewhere in this report.
PH2 1076319v1 10/03/12
29
Off Balance Sheet Arrangements
As of June 30, 2012, we did not have any relationships with unconsolidated entities or financial partners, such as
entities often referred to as structured finance or special purpose entities, which had been established for the purpose
of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. As such, we are not
materially exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in such
relationships.
Recent Accounting Pronouncements
On July 1, 2011, we adopted guidance issued by the Financial Accounting Standards Board (“FASB”) that amends
certain existing and provides additional pro forma disclosure requirements. The guidance provides amendments to
clarify the acquisition date which should be used for reporting the pro forma financial information disclosures when
comparative financial statements are presented. The amendments also improve the usefulness of the pro forma
revenue and earnings disclosures by requiring a description of the nature and amount of material, nonrecurring pro
forma adjustments directly attributable to the business combination(s). The adoption of this guidance did not impact
the Company’s financial position or results of operations.
On January 1, 2012, we adopted guidance issued by the FASB that amends certain fair value measurement
principles and disclosure requirements. The guidance amends the wording used to describe the requirements in U.S.
GAAP for measuring fair value and for disclosing information about fair value measurements, including
clarification of the FASB's intent about the application of existing fair value and disclosure requirements and
changing a particular principle or requirement for measuring fair value or for disclosing information about fair value
measurements. The adoption of this guidance did not impact the Company’s financial position or results of
operations.
On January 1, 2012, we adopted guidance issued by the FASB that amends guidance on the annual testing of
goodwill for impairment. The guidance provides an entity the option to assess qualitative factors to determine
whether it is more likely than not that goodwill might be impaired and whether it is necessary to perform the two
step goodwill impairment test. The amendment also includes examples of events and circumstances that an entity
should consider in evaluating whether it is more likely than not that the fair value of the reporting unit is less than its
carrying amount. The adoption of this guidance did not impact the Company’s financial position or results of
operations.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not Applicable.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements of Radiant Logistics, Inc. including the notes thereto and the report of our
independent accountants are included in this report, commencing at page F-1.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
An evaluation of the effectiveness of our "disclosure controls and procedures" (as such term is defined in Rules 13a-
15(e) or 15d-15(e) of the Exchange Act as of June 30, 2012, was carried out by our management under the
supervision and with the participation of our Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO").
Based upon that evaluation, our CEO and CFO concluded that, as of June 30, 2012, our disclosure controls and
procedures were effective to provide reasonable assurance that information we are required to disclose in reports
that we file or submit under the Exchange Act is (i) recorded, processed, summarized and reported within the time
periods specified in the Securities and Exchange Commission rules and forms and (ii) accumulated and
communicated to our management, including our CEO and CFO, as appropriate to allow timely decisions regarding
disclosure.
PH2 1076319v1 10/03/12
30
Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting as
defined in Rule 13a-15(f) of the Exchange Act. Under the supervision and with the participation of our management,
including our principal executive officer and principal financial officer, we conducted an assessment of the
effectiveness of our internal control over financial reporting. In making this assessment, we used the criteria set forth
by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control —
Integrated Framework. Based on management’s assessment based on the criteria of the COSO, we concluded that, as
of June 30, 2012, our internal control over financial reporting is effective at the reasonable assurance level.
Our internal control system was designed to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with generally accepted
accounting principles in the U.S. Our internal control over financial reporting includes those policies and procedures
which:
(i)
(ii)
(iii)
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of our assets;
provide reasonable assurance that transactions are recorded as necessary to permit preparation of
financial statements in accordance with accounting principles generally accepted in the U.S., and that
receipts and expenditures of the Company are being made only in accordance with authorization of our
management and directors; and
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use
or disposition of our assets that could have a material effect on our consolidated financial statements.
Management’s report was not subject to attestation by our registered public accounting firm pursuant to rules of the
SEC that permit us to provide only management’s report in this annual report.
Changes in Internal Control Over Financial Reporting
There have not been any changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and
15d-15(f) under the Exchange Act) that occurred during the fiscal quarter ended June 30, 2012 that have materially
affected, or are reasonably likely to materially affect, our internal control over financial reporting.
ITEM 9B. OTHER INFORMATION
None.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The following table sets forth information concerning our executive officers and directors. Each of the executive
officers will serve until his or her successor is appointed by our Board of Directors or such executive officer’s earlier
resignation or removal. Each of the directors will serve until the next annual meeting of stockholders or such
director’s earlier resignation or removal.
Name
Age
Position
Bohn H. Crain
Stephen P. Harrington
Jack Edwards
Daniel Stegemoller
Todd E. Macomber
Alesia Pinney
48
55
67
58
48
49
Chief Executive Officer and Chairman of the Board of Directors
Director
Director
Senior Vice President & Chief Operating Officer
Senior Vice President & Chief Financial Officer
Senior Vice President & General Counsel
PH2 1076319v1 10/03/12
31
Board of Directors
We believe that our Board should be composed of individuals with sophistication and experience in many
substantive areas that impact our business. We believe that experience, qualifications, or skills in the following areas
are most important: accounting and finance; strategic planning; logistics and operations, human resources and
development practices; and board practices of other corporations. These areas are in addition to the personal
qualifications described in this section. We believe that all of our current Board members possess the professional
and personal qualifications necessary for board service, and have highlighted particularly noteworthy attributes for
each Board member in the individual biographies below. The principal occupation and business experience, for at
least the past five years, of each current director is as follows:
Bohn H. Crain. Mr. Crain has served as our Chief Executive Officer and Chairman of our Board of Directors since
October 2005. Mr. Crain brings nearly 20 years of industry and capital markets experience in transportation and
logistics. Since January 2005, Mr. Crain has served as the Managing Member of Radiant Capital Partners, LLC, an
entity he formed to execute a consolidation strategy in the transportation/logistics sector. Prior to founding Radiant,
Mr. Crain served as the executive vice president and the chief financial officer of Stonepath Group, Inc. from
January 2002 until December 2004. In 2001, Mr. Crain served as the executive vice president and Chief Financial
Officer of Schneider Logistics, Inc., a third-party logistics company, and from 2000 to 2001 he served as the Vice
President and Treasurer of Florida East Coast Industries, Inc., a public company engaged in railroad and real estate
businesses listed on the New York Stock Exchange. Between 1989 and 2000, Mr. Crain held various vice president
and treasury positions for CSX Corp., and several of its subsidiaries, a Fortune 500 transportation company listed on
the New York Stock Exchange. Mr. Crain earned a Bachelor of Arts in Business Administration with and emphasis
in Accounting from the University of Texas. As a result of these and other professional experiences, Mr. Crain
possesses particular knowledge and experience in logistics management, industry trends, business operations and
accounting that strengthen the Board’s collective qualifications, skills, and experience.
Stephen P. Harrington. Mr. Harrington was appointed as a director in October 2007. Mr. Harrington served as the
Chairman, Chief Executive Officer, Chief Financial Officer, Treasurer and Secretary of Zone Mining Limited, a
publicly-traded Nevada corporation, from August 2006 until January 2007. Mr. Harrington graduated with a B.S.
from Yale University in 1980. As a result of these and other professional experiences, Mr. Harrington possesses
particular knowledge and experience in corporate governance and financial management that strengthen the Board’s
collective qualifications, skills, and experience.
Jack Edwards . Mr. Edwards was appointed as a director in December 2011. Mr. Edwards is an independent
business executive who since 2002 has been providing strategic, investment and operational advisory services to a
broad range of corporate and private equity clients and boards. From 2001 through 2002, he was the President and
Chief Executive Officer of American Medical Response, Inc., a provider of private ambulatory services. Prior to
this, Mr. Edwards served as the President and Chief Executive Officer at a variety of logistics and freight-
forwarding companies, including Danzas Corporation and ITEL Transportation Group. Previously he held senior
executive positions at Circle International, American President Lines and The Southern Pacific Transportation
Company. Mr. Edwards has served as a director of several publicly-held corporations, including Laidlaw Inc.
(NYSE), ITEL Corp. (NYSE) and Sun Gro Horticulture Canada Ltd. (TSX) where he served as Chairman of the
Board. Mr. Edwards currently serves as a director for Adelante Media Group and Zonar Systems. Mr. Edwards
received a Bachelor of Science in Food Science and Technology from the University of California, Davis, and a
Masters of Business Administration in Marketing from the University of Oregon. As a result of these and other
professional experiences, Mr. Edwards possesses particular knowledge and experience in the transportation and
logistics industry, along with business combinations and financial management, that strengthen the Board’s
collective qualifications, skills, and experience.
Executive Officers
Dan Stegemoller. Mr. Stegemoller has served as our Chief Operating Officer since August 2007, and previously
held the position of Vice President since November 2004. He has over 35 years of experience in the transportation
industry. Mr. Stegemoller has an Associate Degree in Business from Indiana University – Purdue University
Indianapolis.
Todd E. Macomber. Mr. Macomber has served as our Senior Vice President and Chief Financial Officer since
March 2011, as our Senior Vice President and Chief Accounting Officer since August 2010, and as our Vice
President and Corporate Controller since December 2007. Prior to joining us, Mr. Macomber served as Senior Vice
President and Chief Financial Officer of Biotrace International, Inc., a subsidiary of Biotrace International PLC, an
PH2 1076319v1 10/03/12
32
industrial microbiology company listed on the London Stock Exchange. Mr. Macomber earned a Bachelor of Arts,
emphasis in Accounting from Seattle University.
Alesia L. Pinney. Ms. Pinney became our Senior Vice President, General Counsel and Secretary in May 2012. Prior
to joining the Company, Ms. Pinney served as a business and legal consultant from June 2011 to May 2012. Ms.
Pinney was General Counsel and Secretary of InfoSpace, Inc. from July 2009 to June 2011. From September 2006
to July 2009, Ms. Pinney provided operational and legal services to four privately held companies, including Sound
Inpatient Physicians, LLC as its Chief Administrative Officer, Secretary and General Counsel (2008-09), Talyst, Inc.
as its Executive Vice President Operations and Legal (2007-08), Lighthouse Document Technologies, Inc. as its
Acting General Counsel (2007), and Weldon Barber as its Chief Operating Officer and General Counsel (2006-07).
Prior to such time, Ms. Pinney was employed by drugstore.com, Inc. as its Vice President, Legal and Human
Affairs, Secretary and General Counsel. Ms. Pinney earned a Bachelor of Arts, emphasis in Accounting from Seattle
University, a Master of Taxation from the University of Denver, College of Law, and a Juris Doctor from Seattle
University, formerly the University of Puget Sound School of Law.
The information in the Proxy Statement set forth under the captions “Corporate Governance” and “Section 16(a)
Beneficial Ownership Reporting Compliance” is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information in the Proxy Statement set forth under the captions “Executive Compensation” is incorporated
herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
The information in the Proxy Statement set forth under the captions “Principal Stockholders” and “Executive
Compensation – Securities authorized for Issuance under Equity Compensation Plans” is incorporated herein by
reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR
INDEPENDENCE
The information in the Proxy Statement set forth under the captions “Corporate Governance” is incorporated herein
by reference.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
The information in the Proxy Statement set forth under the captions “Principal Accounting Fees and Services” is
incorporated herein by reference.
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
Exhibit
Number
Description
2.1 Agreement and Plan of Merger by and among
Radiant Logistics, Inc., and DBA Acquisition
Corp. and the Principal Shareholders of DBA
Distribution Services, Inc., and EBCP I, LLC,
as Shareholders’ Agent
2.2 Asset Purchase Agreement by and among
Isla
Inc., and
Radiant Global Logistics,
International, Ltd.
Incorporated by Reference
Filed
Herewith
Form
8-K
Period
Ending Exhibit
Filing
Date
2.1
3/31/11
8-K
2.1
11/15/11
3.1
Certificate of Incorporation
SB-2
3.1
9/20/02
PH2 1076319v1 10/03/12
33
Incorporated by Reference
Filed
Herewith
Form
8-K
Period
Ending Exhibit
3.1
Filing
Date
10/18/05
8-K
8-K
8-K
8-K
8-K
8-K
8-K
8-K
8-K
8-K
8-K
3.2
7/19/11
2.3
4/12/11
4.1
12/7/11
10.7
1/18/06
10.8
1/18/06
10.1
6/10/12
10.1
3/31/11
10.3
3/31/11
10.2
4/12/11
10.4
4/12/11
10.5
3/31/12
8-K
10.6
3/31/12
Exhibit
Number
Description
3.2 Amendment
to Registrant’s Certificate of
Incorporation (Certificate of Ownership and
Merger Merging Radiant Logistics, Inc. into
Golf Two, Inc. dated October 18, 2005)
3.3 Amended and Restated Bylaws
3.4
4.1
Certificate of Merger dated April 6, 2011
between DBA Distribution Services, Inc. and
DBA Acquisition Corp.
Investor Rights Agreement dated December 1,
2011 by and between Radiant Logistics, Inc.
and Caltius Partners IV, LP
10.1 Executive Employment Agreement dated
January 13, 2006 by and between Radiant
Logistics, Inc. and Bohn H. Crain
10.2 Option Agreement dated October 20, 2005 by
and between Radiant Logistics, Inc. and Bohn
H. Crain
10.3 Letter Agreement dated June 10, 2011;
Amendment to the Employment Agreement
between Radiant Logistics, Inc. and Bohn H.
Crain
10.4 Employment Agreement dated as of June 30,
2008 between DBA Distribution Services, Inc.
and Paul Pollara
10.5 Employment Agreement dated as of June 30,
2008 between DBA Distribution Services, Inc.
and James Eagen
10.6 First Amendment to Employment Agreement
dated April 6, 2011 between DBA Distribution
Services, Inc. and Paul Pollara
10.7 First Amendment to Employment Agreement
dated April 6, 2011 between DBA Distribution
Services, Inc. and James C. Eagen
10.8 Noncompetition, Nonsolicitation and No-Hire
Agreement, dated as of June 30, 2008, between
DBA Distribution Services, Inc. and Paul
Pollara
10.9 Noncompetition, Nonsolicitation and No-Hire
Agreement, dated as of June 30, 2008, between
DBA Distribution Services, Inc. and James
Eagen
PH2 1076319v1 10/03/12
34
Incorporated by Reference
Filed
Herewith
Form
8-K
Period
Ending Exhibit
10.1
Filing
Date
12/7/11
8-K
8-K
8-K
8-K
8-K
8-K
10.1
5/14/12
10.2
5/14/12
10.3
5/14/12
10.4
5/14/12
10.5
5/14/12
10.2
12/7/11
10-Q
3/31/12
10.1
5/16/12
8-K
10.3
12/7/11
Exhibit
Number
Description
10.10 Employment Agreement
effective
November 15, 2011, by and between Radiant
Global Logistics, Inc. and Jonathan Fuller
dated
10.11 Employment Agreement dated May 14, 2012
by and between Radiant Logistics, Inc. and Dan
Stegemoller
10.12 Employment Agreement dated May 14, 2012
by and between Radiant Logistics, Inc. and
Todd Macomber
10.13 Employment Agreement dated May 14, 2012
by and between Radiant Logistics, Inc. and
Alesia Pinney
10.14 Operating Agreement of Radiant Logistics
Partners, LLC dated June 28, 2006
10.15 Discretionary
Management
Incentive
Compensation Plan effective July 1, 2012
10.16 Loan Agreement dated December 1, 2011 by
and among Radiant Logistics, Inc., Radiant
Inc., Radiant Logistics
Global Logistics,
Partners,
Transportation
Services, Inc., Adcom Express, Inc., DBA
Distribution Services, Inc., Radiant Customs
Services, Inc., and Bank of America, N.A.
LLC, Radiant
10.17 First Loan Modification Agreement to Loan
Agreement dated December 1, 2011 by and
among Radiant Logistics, Inc., Radiant Global
Logistics, Inc., Radiant Logistics Partners,
LLC, Radiant Transportation Services, Inc.,
Adcom Express,
Inc., DBA Distribution
Services, Inc., Radiant Customs Services, Inc.,
and Bank of America, N.A.
10.18 Subordination Agreement dated December 1,
2011 by and between Caltius Partners IV, LP,
Caltius Partners Executive IV, LP, Radiant
Logistics, Inc., Radiant Global Logistics, Inc.,
Radiant Logistics Partners, LLC, Radiant
Transportation Services, Inc., Adcom Express,
Inc., DBA Distribution Services, Inc., Radiant
Customs Services, Inc., and Bank of America,
N.A.
PH2 1076319v1 10/03/12
35
Incorporated by Reference
Filed
Herewith
Form
8-K
Period
Ending Exhibit
10.4
Filing
Date
12/7/11
Exhibit
Number
10.19
Description
Investment Agreement dated December 1, 2011
by and between Caltius Partners IV, LP, Caltius
Partners Executive IV, LP, Radiant Logistics,
Inc., Radiant Global Logistics, Inc., Radiant
Radiant
Logistics
Transportation Services, Inc., Adcom Express,
Inc., DBA Distribution Services, Inc., Radiant
Customs Services, Inc., and Bank of America,
N.A.
Partners,
LLC,
10.29 Senior Subordinated Notes
8-K
10.5
10.6
12/7/11
14.1 Code of Business Conduct and Ethics
10-KSB
14.1
3/17/06
21.1 Subsidiaries of the Registrant
23.1 Consent of Peterson Sullivan LLP
31.1 Certification of Chief Executive Officer
Pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
31.2 Certification of Chief Financial Officer
Pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
32.1 Certification of Chief Executive Officer and
Chief Financial officer Pursuant to Section 906
of the Sarbanes-Oxley Act of 2002
101.INS* XBRL Instance
101.SCH* XBRL Taxonomy Extension Schema
101.CAL* XBRL Taxonomy Extension Calculation
101.DEF* XBRL Taxonomy Extension Definition
101.LAB* XBRL Taxonomy Extension Label
101.PRE* XBRL Taxonomy Extension Presentation
X
X
X
X
X
X
X
X
X
X
X
* XBRL information is furnished and not filed or part of a registration statement or prospectus of sections 11 or 12
of the Securities Act of 1933, as amended, is deemed not filed for purposes of section 18 of the Securities Exchange
Act of 1934, as amended, and otherwise is not subject to liability under these sections.
[The remainder of the page is intentionally left blank. Signature page to follow.]
PH2 1076319v1 10/03/12
36
Pursuant to the requirements of Section 13 or 15(d) 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.
SIGNATURES
Date: September 26, 2012
RADIANT LOGISTICS, INC.
By:
/s/ Bohn H. Crain
Bohn H. Crain
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature
/s/ Stephen P. Harrington
Stephen P. Harrington
/s/ Jack Edwards
Jack Edwards
/s/ Bohn H. Crain
Bohn H. Crain
/s/ Todd E. Macomber
Todd E. Macomber
Title
Director
Director
Chairman and
Chief Executive Officer
Senior Vice President and Chief
Financial Officer
Date
September 26, 2012
September 26, 2012
September 26, 2012
September 26, 2012
PH2 1076319v1 10/03/12
37
[This page intentionally left blank.]
FINANCIAL STATEMENTS
INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS
RADIANT LOGISTICS, INC.
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets as of June 30, 2012 and 2011
Consolidated Statements of Income (Operations) for the years ended June 30, 2012 and
2011
Consolidated Statements of Stockholders’ Equity for the years ended June 30, 2012 and
2011
Consolidated Statements of Cash Flows for the years ended June 30, 2012 and 2011
Notes to Consolidated Financial Statements
F-2
F-3
F-4
F-5
F-6 – F-7
F-8 – F-27
PH2 1076319v1 10/03/12
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Audit Committee of the Board of Directors
Radiant Logistics, Inc.
Bellevue, Washington
We have audited the accompanying consolidated balance sheets of Radiant Logistics, Inc. ("the Company") as of
June 30, 2012 and 2011, and the related consolidated statements of income (operations), stockholders' equity, and
cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated financial statements based on our
audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about
whether the consolidated financial statements are free of material misstatement. The Company has determined that it
is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our
audits included consideration of internal control over financial reporting as a basis for designing audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the
Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements.
An audit also includes assessing the accounting principles used and significant estimates made by management, as
well as evaluating the overall consolidated financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the
financial position of Radiant Logistics, Inc. as of June 30, 2012 and 2011, and the results of its operations and its
cash flows for the years then ended, in conformity with accounting principles generally accepted in the United
States.
/S/ PETERSON SULLIVAN LLP
September 26, 2012
PH2 1076319v1 10/03/12
F-2
RADIANT LOGISTICS, INC.
Consolidated Balance Sheets
ASSETS
Current assets
Cash and cash equivalents
$
Accounts receivable, net of allowance of $1,311,670 and $1,592,235, respectively
Current portion of employee, office and other receivables
Income tax deposit
Prepaid expenses and other current assets
Deferred tax asset
Total current assets
Furniture and equipment, net
Acquired intangibles, net
Goodwill
Employee, office and other receivables, net of current portion
Deposits and other assets
Deferred tax asset
Total long-term assets
Total assets
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued transportation costs
Commissions payable
Other accrued costs
Income taxes payable
Current portion of notes payable to former shareholders of DBA
Amounts due to former shareholders of acquired operations
Other current liabilities
Total current liabilities
$
$
Notes payable and other long-term debt, net of current portion and debt discount
Contingent consideration
Deferred rent liability
Deferred tax liability
Other long-term liabilities
Total long-term liabilities
Total liabilities
Stockholders' equity
Preferred stock, $0.001 par value, 5,000,000 shares authorized; no shares issued
or outstanding
Common stock, $0.001 par value, 50,000,000 shares authorized. 33,025,865 and
31,676,438 issued and outstanding, respectively
Additional paid-in capital
Treasury stock, at cost, 0 and 4,919,239 shares, respectively
Retained deficit
Total Radiant Logistics, Inc. stockholders’ equity
Non-controlling interest
Total stockholders’ equity
Total liabilities and stockholders’ equity
June 30,
2012
June 30,
2011
66,888 $
51,939,016
111,582
11,248
2,573,531
684,231
55,386,496
434,185
41,577,053
162,773
-
1,761,273
1,142,077
45,077,361
1,735,157
1,428,063
11,722,812
14,951,217
162,088
512,369
33,259
27,381,745
84,503,398 $
37,131,212 $
2,929,449
2,041,596
-
767,092
2,664,224
64,392
45,597,965
20,532,934
6,200,000
680,521
-
89,887
27,503,342
73,101,307
2,879,846
6,650,008
181,459
403,815
-
10,115,128
56,620,552
27,872,185
3,570,858
1,992,694
333,999
800,000
2,657,781
135,927
37,363,444
11,869,268
-
631,630
485,907
120,571
13,107,376
50,470,820
-
-
14,481
13,003,987
-
(1,713,928 )
11,304,540
97,551
11,402,091
84,503,398 $
18,051
11,060,701
(1,407,455 )
(3,615,322 )
6,055,975
93,757
6,149,732
56,620,552
$
The accompanying notes form an integral part of these consolidated financial statements.
PH2 1076319v1 10/03/12
F-3
RADIANT LOGISTICS, INC.
Consolidated Statements of Income (Operations)
Revenues
Cost of transportation
Net revenues
Agent commissions
Personnel costs
Selling, general and administrative expenses
Depreciation and amortization
Transition costs associated with DBA acquisition
Change in contingent consideration
Total operating expenses
Income from operations
Other income (expense):
Interest income
Interest expense
Loss on litigation settlement
Other
Total other expense
Income before income tax expense
Income tax expense
Net income
Less: Net income attributable to non-controlling interest
Net income attributable to Radiant Logistics, Inc.
Net income per common share – basic
Net income per common share –diluted
Weighted average shares outstanding:
Basic shares
Diluted shares
YEAR ENDED
JUNE 30, 2012
YEAR ENDED
JUNE 30, 2011
$
297,003,096 $
212,294,364
84,708,732
203,820,175
141,315,637
62,504,538
52,427,051
13,191,851
11,348,154
3,142,849
1,018,298
(900,000 )
80,228,203
42,352,576
7,733,701
5,335,354
1,325,289
582,762
-
57,329,682
4,480,529
5,174,856
19,298
(1,269,439 )
-
323,620
(926,521 )
21,607
(228,749 )
(150,000 )
218,611
(138,531 )
3,554,008
5,036,325
(1,474,820 )
(2,025,492 )
2,079,188
3,010,833
(177,794 )
(159,209 )
1,901,394 $
2,851,624
0.06 $
0.05 $
0.09
0.09
32,260,375
35,113,021
30,424,020
32,021,404
$
$
$
The accompanying notes form an integral part of these consolidated financial statements.
PH2 1076319v1 10/03/12
F-4
RADIANT LOGISTICS, INC.
Consolidated Statements of Stockholders’ Equity
COMMON STOCK
RADIANT LOGISTICS STOCKHOLDERS
ADDITIONAL
PAID-IN
CAPITAL
TREASURY
AMOUNT
$ 16,157 $ 8,108,239 $ (936,190 ) $ (6,466,946 ) $ 66,548 $ 787,808
(471,265 )
(471,265 )
-
STOCK
-
-
-
RETAINED
EARNINGS
(DEFICIT)
NON-
CONTROLLING
INTEREST
TOTAL
SHAREHOLDERS
EQUITY
732
1,071
91
-
-
-
257,778
2,398,929
180,409
115,346
-
-
-
-
-
-
-
-
-
-
258,510
-
-
-
-
2,851,624
-
-
-
(132,000 )
159,209
2,400,000
180,500
115,346
(132,000 )
3,010,833
Balance at June 30, 2010
Repurchase of common stock
Issuance of common stock to the former
Adcom shareholder per earn-out
agreement at $0.35 per share
Issuance of common stock to DBA offices
Conversion of debt related to acquisition
of DBA to common stock at $2.24 per
share
at $2.00 per share
Share-based compensation
Distributions to non-controlling interest
Net income for the year ended June 30,
2011
SHARES
31,273,461
(1,490,740 )
732,038
1,071,429
90,250
-
-
-
Balance at June 30, 2011
Issuance of common stock to the former
Adcom shareholder per earn-out
agreement at $2.29 per share
Issuance of common stock related to
funding for Isla acquisition at $2.35 per
share
Issuance of common stock related to
purchase of Isla at $2.40 per share
Issuance of common stock related to
purchase of ALBS at $2.07 per share
Share-based compensation
Exercise of stock options
Tax benefit from exercise of stock options
Retirement of treasury stock
Distributions to non-controlling interest
Net income for the year ended June 30,
2012
31,676,438
$ 18,051
$ 11,060,701 $ (1,407,455 ) $ (3,615,322 ) $ 93,757 $ 6,149,732
134,475
500,000
552,333
142,489
-
20,130
-
-
-
-
134
308,414
-
-
-
308,548
500
552
143
-
20
-
(4,919 )
-
-
1,174,500
1,324,448
294,857
225,991
5,658
11,954
(1,402,536 )
-
-
-
-
-
-
-
-
1,407,455
-
-
-
-
-
-
-
-
-
-
1,901,394
-
-
-
-
-
-
-
(174,000 )
177,794
1,175,000
1,325,000
295,000
225,991
5,678
11,954
-
(174,000 )
2,079,188
Balance at June 30, 2012
33,025,865
$ 14,481 $ 13,003,987 $ - $ (1,713,928 ) $
97,551 $ 11,402,091
The accompanying notes form an integral part of these consolidated financial statements.
PH2 1076319v1 10/03/12
F-5
RADIANT LOGISTICS, INC.
Consolidated Statements of Cash Flows
CASH FLOWS PROVIDED BY OPERATING ACTIVITIES
Net income
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH PROVIDED BY
$
YEAR ENDED
JUNE 30, 2012
YEAR ENDED
JUNE 30, 2011
1,901,394 $ 2,851,624
OPERATING ACTIVITIES
non-cash compensation expense (stock options)
tax benefit from exercise of stock options
amortization of intangibles
depreciation and leasehold amortization
deferred income tax benefit
amortization of loan fees and original issue discount
change in contingent consideration
change in non-controlling interest
loss on litigation settlement
loss on disposal of fixed assets
change in provision for doubtful accounts
CHANGE IN OPERATING ASSETS AND LIABILITIES
accounts receivable
employee, office, and other receivables
income tax deposit and income taxes payable
prepaid expenses, deposits and other assets
accounts payable and accrued transportation costs
commissions payable
other accrued costs
other liabilities
deferred rent liability
Net cash provided by operating activities
CASH FLOWS USED FOR INVESTING ACTIVITIES
Acquisition of Isla International, Ltd.
Acquisition of Brunswicks Logistics, Inc. d/b/a/ ALBS Logistics, Inc.
Acquisition of DBA, net of acquired cash of $1,971,472
Purchase of furniture and equipment
Payments to former shareholders of acquired operations
Net cash used for investing activities
CASH FLOWS PROVIDED BY (USED FOR) FINANCING ACTIVITIES
Proceeds from credit facility, net of credit fees
Proceeds from debt issuance to Caltius, net of debt issuance costs of $637,407
Repayments of notes payable to former shareholders of acquired operations
Distributions to non-controlling interest
Cost of shelf registration statement
Proceeds from exercise of stock options
Proceeds from sales of common stock to DBA offices
Purchases of treasury stock
Net cash provided by financing activities
NET DECREASE IN CASH AND CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR
CASH AND CASH EQUIVALENTS, END OF YEAR
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Income taxes paid
Interest paid
225,991
11,954
2,636,145
506,704
(61,320 )
143,852
(900,000 )
177,794
-
-
(280,565 )
(10,081,398 )
70,562
(345,247 )
(793,843 )
9,259,027
(641,409 )
48,902
(135,927 )
48,891
1,791,507
(7,656,582 )
(2,655,000 )
-
(701,062 )
(515,525 )
(11,528,169 )
1,165,130
9,362,593
(865,817 )
(174,000 )
(124,219 )
5,678
-
-
9,369,365
(367,297 )
434,185
115,346
-
941,473
383,816
(108,647 )
6,050
-
159,209
150,000
11,931
(87,669 )
(5,372,281 )
100,612
295,871
(297,298 )
2,481,020
1,233,466
(16,229 )
(89,712 )
173,172
2,931,754
-
-
(3,428,528 )
(380,137 )
(1,576,494 )
(5,385,159 )
2,628,247
-
-
(132,000 )
-
-
180,500
(471,265)
2,205,482
(247,923 )
682,108
$
$
$
66,888 $ 434,185
1,910,955 $ 1,876,742
879,796 $ 120,266
The accompanying notes form an integral part of these consolidated financial statements.
PH2 1076319v1 10/03/12
F-6
Supplemental disclosure of non-cash investing and financing activities:
In September 2010, the Company revised its estimate of the "Tier-One Earn-Out Payment" (see Note 4) relating to
the acquisition of Adcom for the year ended June 30, 2010, resulting in an increase to goodwill and the amount due
to the former shareholders of acquired operations of $28,522.
In December 2010, the Company issued 732,038 shares of common stock at a fair value of $0.35 per share in
satisfaction of the $258,510 Adcom earn-out payment for the year ended June 30, 2010, resulting in a decrease to
the amount due to former shareholders of acquired operations, an increase in common stock issuable of $732 and an
increase in additional paid-in capital of $257,778.
In May 2011, the Company exercised its right to convert $2.4 million worth of notes payable into 1,071,429 shares
of Company stock, resulting in a decrease to other current and long-term liabilities totaling $2.4 million, an increase
in common stock of $1,071 and an increase in additional paid-in capital of $2,398,929.
In June 2011, $617,095 was recorded as due to former shareholders of acquired operations and an increase to
goodwill for the third annual earn-out from the Company’s acquisition of Adcom.
In December 2011, the Company issued 134,475 shares of common stock at a fair value of $2.29 per share in
satisfaction of the $308,548 Adcom earn-out payment for the year ended June 30, 2011, resulting in a decrease to
the amount due to former shareholders of acquired operations, an increase in common stock issuable of $134 and an
increase in additional paid-in capital of $308,414.
In December 2011, the Company issued 500,000 shares of common stock at a fair value of $2.35 per share related to
the funding received from Caltius and used in the acquisition of Isla, resulting in a decrease to notes payable and
other long-term debt of $1,175,000, an increase in common stock issuable of $500 and an increase in additional
paid-in capital of $1,174,500.
In March 2012, the Company issued 552,333 shares of common stock at a fair value of $2.40 per share in
satisfaction of $1,325,000 of the Isla purchase price, resulting in a decrease to the amount due to former
shareholders of acquired operations, an increase in common stock issuable of $552 and an increase to additional
paid-in-capital of $1,324,448.
In May 2012, the Company issued 142,489 shares of common stock at a fair value of $2.07 per share in satisfaction
of $295,000 of the ALBS purchase price, resulting in a decrease to the amount due to former shareholders of
acquired operations, an increase in common stock issuable of $143 and an increase to additional paid-in-capital of
$294,857.
In June 2012, $864,224 was recorded as due to former shareholders of acquired operations and an increase to
goodwill for the fourth annual earn-out from the Company’s acquisition of Adcom.
PH2 1076319v1 10/03/12
F-7
RADIANT LOGISTICS, INC.
Notes to the Consolidated Financial Statements
NOTE 1 - THE COMPANY AND BASIS OF PRESENTATION
The Company
Radiant Logistics, Inc. (the "Company") is a non-asset based transportation and logistics services company
providing customers domestic and international freight forwarding services and other value added supply chain
management services, including order fulfillment, inventory management and warehousing. The Company is
executing a strategy to expand its operations through a combination of organic growth and the strategic acquisition
of non-asset based transportation and logistics providers meeting the Company’s acquisition criteria.
The Company’s first acquisition of Airgroup Corporation ("Airgroup") was completed on January 1, 2006.
Airgroup, headquartered in Bellevue, Washington, is a non-asset based logistics company providing domestic and
international freight forwarding services through a network of independent agent offices across North America.
The Company continues to seek additional companies as suitable acquisition candidates and has completed five
material acquisitions since its acquisition of Airgroup. In November 2007, the Company acquired certain assets of
Automotive Services Group in Detroit, Michigan to service the automotive industry. In September 2008, the
Company acquired Adcom Express, Inc. d/b/a Adcom Worldwide ("Adcom"), adding an additional 30 locations
across North America and augmenting the Company’s overall domestic and international freight forwarding
capabilities. In April 2011, the Company acquired DBA Distribution Services, Inc., d/b/a Distribution by Air
("DBA"), adding an additional 26 locations across North America, further expanding the Company’s physical
network and service capabilities. In December 2011, the Company acquired Laredo, Texas based Isla International
Ltd, (“Isla”) to serve as the Company’s gateway to Mexico. In February 2012, the Company acquired New York-
JFK based Brunswicks Logistics, Inc. d/b/a ALBS Logistics, Inc. (“ALBS”), a strategic location for domestic and
international logistics services.
In connection with the acquisition of Adcom, the Company changed the name of Airgroup Corporation to Radiant
Global Logistics, Inc. ("RGL") in order to better position its centralized back-office operations to service a multi-
brand network. RGL, through the Radiant, Airgroup, Adcom and DBA network brands, has a diversified account
base including manufacturers, distributors and retailers using a network of independent carriers through a
combination of company owned and independent agency offices and international agents positioned strategically
around the world.
The Company’s growth strategy will continue to focus on both organic growth and growth through acquisitions. For
organic growth, the Company will focus on strengthening and retaining existing, and expanding new customer
agency relationships. Since the Company’s acquisition of Airgroup in January 2006, the Company has focused its
efforts on the build-out of its network of independent agency offices, as well as enhancing its back-office
infrastructure, transportation and accounting systems. The Company also continues to search for targets that fit
within its acquisition criteria.
Basis of Presentation
The 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 RGL, and
60% owned by RCP (See Note 11), an affiliate of Bohn H. Crain, the Company’s Chief Executive Officer, whose
accounts are included in the consolidated financial statements. All significant intercompany balances and
transactions have been eliminated.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
a)
The preparation of financial statements and related disclosures in accordance with accounting principles generally
accepted in the United States 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.
PH2 1076319v1 10/03/12
F-8
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 fair values of the Company’s receivables, income tax deposit, accounts payable and accrued transportation
costs, commissions payable, other accrued costs, income taxes payable and amounts due to former shareholders of
acquired operations approximate the carrying values due to the relatively short maturities of these instruments. The
fair value of the Company’s credit facility, DBA notes payable, and other long-term liabilities would not differ
significantly from the recorded amount if recalculated based on current interest rates. The fair value of the
subordinated Caltius notes payable is not practicable to determine given the complex terms associated with this
instrument. Contingent consideration attributable to the Company’s recent acquisitions of Isla and ALBS are
reported at fair value.
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 which are not securing any corporate obligations.
e)
Concentrations
The Company maintains its cash in bank deposit accounts, which, 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 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.
The Company derives a substantial portion of its revenue pursuant to exclusive agency agreements with
independently-owned agent offices operating under the various Company brands. Each individual agent office is
responsible for some or all of the bad debt expense related to the underlying customers being serviced by the office.
To facilitate this arrangement, each office is 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 office’s bad
debt reserve account for any accounts receivable aged beyond 90 days. The bad debt reserve account is continually
replenished with a portion (typically 5% - 10%) of the office’s weekly commission check being directed to fund this
account. 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 are recognized as a receivable in the Company’s financial statements. Further, the agency agreements
provide that the Company may withhold all or a portion of future commission checks payable to the individual
office in satisfaction of any deficit balance. As of the date of this report, a number of the Company’s agency offices
have a deficit balance in their bad debt reserve account. The Company expects to replenish these funds through the
future business operations of these offices. However, to the extent any of these offices 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.
As of the date of this Report, the Company has begun collection proceedings against two customers who owe the
Company approximately $1.5 million. The Company has expensed its portion of these amounts. While there can be
no assurance as to the amount that may be recovered in the future, based upon, among others: (i) the Company’s
historic collection experience; (ii) the portion of the bad debt recoverable from the individual agency location
responsible for the account; and (iii) the anticipated recovery likely from these customers; the Company does not
believe its exposure to these customers will be material.
PH2 1076319v1 10/03/12
F-9
g)
Furniture and Equipment
Technology (computer software, hardware, and communications), furniture, and equipment are stated at cost, less
accumulated depreciation over the estimated useful lives of the respective assets. Depreciation is computed using
five to seven year lives for vehicles, communication, office, furniture, and computer equipment using the straight
line method of depreciation. Computer software is depreciated over a three year life using the straight line method of
depreciation. For leasehold improvements, the cost is depreciated 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 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 and related costs over the value assigned to the net tangible and
identifiable intangible assets of business acquired. The Company typically performs its annual impairment test
effective as of April 1 of each year, unless events or circumstances indicate, an impairment may have occurred
before that time. The Company assessed qualitative factors to determine whether it was 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. The Company has only
one reporting unit. 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 June 30, 2012,
management believes there are no indications of impairment.
The table below reflects changes in goodwill for the years ending June 30:
Goodwill, beginning of year
DBA acquisition (see Note 5)
Isla acquisition (see Note 6)
ALBS acquisition (see Note 7)
Adcom earn-out (see Note 4)
Goodwill, end of year
i)
Long-Lived Assets
2012
2011
$
6,650,008 $
-
5,095,870
2,341,115
864,224
982,788
5,021,603
-
-
645,617
$
14,951,217 $
6,650,008
Acquired intangibles consist of customer related intangibles and non-compete agreements arising from the
Company’s acquisitions. Customer related intangibles are amortized using accelerated methods over approximately
5 years and non-compete agreements are amortized using the straight line method over the term of the underlying
agreements. See Notes 4, 5, 6 and 7.
PH2 1076319v1 10/03/12
F-10
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 June 30, 2012.
j)
Business Combinations
We account for business combinations using the purchase method of accounting and allocate 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 we use our best estimates and assumptions to accurately value assets acquired and liabilities
assumed at the acquisition date, our 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, we record 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 consolidated statement of income.
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 our 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 consolidated statement of income. For the year ended June 30,
2012, we recorded a reduction to contingent consideration of $900,000.
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 May 2021. Rent expense is recognized straight
line over the term of the lease. Minimum future lease payments under these non-cancelable operating leases for the
next five fiscal years ending June 30 and thereafter are as follows:
2013
2014
2015
2016
2017
Thereafter
Total minimum lease payments
$
2,146,781
1,968,307
1,663,623
1,038,382
309,111
1,302,257
$
8,428,461
Rent expense amounted to $2,025,548 and $907,677 for the years ended June 30, 2012 and 2011.
l)
401(k) Savings Plan
The Company has employee savings plans under which the Company provides safe harbor matching contributions.
During the years ended June 30, 2012 and 2011, the Company’s contributions under the plans were $176,855 and
$110,309, respectively.
PH2 1076319v1 10/03/12
F-11
Income Taxes
m)
Deferred income taxes are reported using the liability method. Deferred tax assets are recognized for deductible
temporary differences and deferred tax liabilities are recognized for taxable temporary differences. Temporary
differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred
tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that
some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for
the effects of changes in tax laws and rates on the date of enactment.
Revenue Recognition and Purchased Transportation Costs
The Company reports a liability for unrecognized tax benefits resulting from uncertain income tax positions taken or
expected to be taken in an income tax return. Estimated interest and penalties are recorded as a component of
interest expense or other expense, respectively.
n)
The Company is the primary obligor responsible for providing the service desired by the customer and is responsible
for fulfillment, including the acceptability of the service(s) ordered or purchased by the customer. At the Company’s
sole discretion, it sets the prices charged to its customers, and is not required to obtain approval or consent from any
other party in establishing its prices. The Company has multiple suppliers for the services it sells to its customers,
and has the absolute and complete discretion and right to select the supplier that will provide the product(s) or
service(s) ordered by a customer, including changing the supplier on a shipment-by-shipment basis. In most cases,
the Company determines the nature, type, characteristics, and specifications of the service(s) ordered by the
customer. The Company also assumes credit risk for the amount billed to the customer.
As a non-asset based carrier, the Company does not own transportation assets. The Company generates the major
portion of its air and ocean freight revenues by purchasing transportation services from direct (asset-based) carriers
and reselling those services to its customers. Based upon the terms in the contract of carriage, revenues related to
shipments where the Company issues a House Airway Bill or a House Ocean Bill of Lading are recognized at the
time the freight is tendered to the direct carrier at origin net of taxes. Costs related to the shipments are also
recognized at this same time based upon anticipated margins, contractual arrangements with direct carriers, and
other known factors. The estimates are routinely monitored and compared to actual invoiced costs. The estimates are
adjusted as deemed necessary by the Company to reflect differences between the original accruals and actual costs
of purchased transportation.
This method generally results in recognition of revenues and purchased transportation costs earlier than the preferred
methods under GAAP which do not recognize revenue until a proof of delivery is received or which recognize
revenue as progress on the transit is made. The Company’s method of revenue and cost recognition does not result
in a material difference from amounts that would be reported under such other methods.
Share-Based Compensation
Basic and Diluted Income Per Share
All other revenue, including revenue from other value added services including warehousing and fulfillment
services, is recognized upon completion of the service.
o)
The Company accounts for share-based compensation under the fair value recognition provisions such that
compensation cost is measured at the grant date based on the value of the award and is expensed ratably over the
vesting period. Determining the fair value of share-based awards at the grant date requires judgment, including
estimating the percentage of awards which will be forfeited, stock volatility, the expected life of the award, and
other inputs. If actual forfeitures differ significantly from the estimates, share-based compensation expense and the
Company's results of operations could be materially impacted. The Company issues new shares of common stock to
satisfy exercises and vesting of awards granted under our stock plan.
p)
Basic income per share is computed by dividing net income attributable to common stockholders by the weighted
average number of common shares outstanding. Diluted income per share is computed similar to basic income per
share except that the denominator is increased to include the number of additional common shares that would have
been outstanding if the potential common shares, such as stock options, had been issued and if the additional
common shares were dilutive. For the year ended June 30, 2012, the weighted average outstanding number of
potentially dilutive common shares totaled 35,113,021 shares of common stock, including options to purchase
4,873,174 shares of common stock at June 30, 2012, of which 1,190,803 were excluded as their effect would have
been antidilutive. For the year ended June 30, 2011, the weighted average outstanding number of potentially dilutive
common shares totaled 32,021,404 shares of common stock, including options to purchase 3,865,242 shares of
common stock at June 30, 2011, of which 106,900 were excluded as their effect would have been antidilutive. The
following table reconciles the numerator and denominator of the basic and diluted per share computations for
earnings per share as follows.
PH2 1076319v1 10/03/12
F-12
Weighted average basic shares outstanding
Options
Weighted average dilutive shares outstanding
q)
Comprehensive Income
Year ended
June 30, 2012
Year ended
June 30, 2011
32,260,375
2,852,646
35,113,021
30,424,020
1,597,384
32,021,404
The Company has no components of Other Comprehensive Income and, accordingly, no Statement of
Comprehensive Income has been included in the accompanying consolidated financial statements.
r)
Reclassifications
Certain amounts for prior periods have been reclassified in the consolidated financial statements to conform to the
classification used in fiscal year 2012.
NOTE 3 - RECENT ACCOUNTING PRONOUNCEMENTS
On July 1, 2011, we adopted guidance issued by the Financial Accounting Standards Board (“FASB”) that amends
certain existing and provides additional pro forma disclosure requirements. The guidance provides amendments to
clarify the acquisition date which should be used for reporting the pro forma financial information disclosures when
comparative financial statements are presented. The amendments also improve the usefulness of the pro forma
revenue and earnings disclosures by requiring a description of the nature and amount of material, nonrecurring pro
forma adjustments directly attributable to the business combination(s). The adoption of this guidance did not impact
the Company’s financial position or results of operations.
On January 1, 2012, we adopted guidance issued by the FASB that amends certain fair value measurement
principles and disclosure requirements. The guidance amends the wording used to describe the requirements in U.S.
GAAP for measuring fair value and for disclosing information about fair value measurements, including
clarification of the FASB's intent about the application of existing fair value and disclosure requirements and
changing a particular principle or requirement for measuring fair value or for disclosing information about fair value
measurements. The adoption of this guidance did not impact the Company’s financial position or results of
operations.
On January 1, 2012, we adopted guidance issued by the FASB that amends guidance on the annual testing of
goodwill for impairment. The guidance provides an entity the option to assess qualitative factors to determine
whether it is more likely than not that goodwill might be impaired and whether it is necessary to perform the two
step goodwill impairment test. The amendment also includes examples of events and circumstances that an entity
should consider in evaluating whether it is more likely than not that the fair value of the reporting unit is less than its
carrying amount. The adoption of this guidance did not impact the Company’s financial position or results of
operations.
NOTE 4 - ACQUISITION OF ADCOM EXPRESS, INC.
On September 5, 2008, the Company entered into and closed a Stock Purchase Agreement (the "SPA") pursuant to
which it acquired 100% of the issued and outstanding stock of Adcom Express, Inc., d/b/a Adcom Worldwide
("Adcom"), a privately-held Minnesota corporation founded in 1978. At the time of the acquisition, Adcom
provided a full range of domestic and international freight forwarding solutions to a diversified account base
including manufacturers, distributors and retailers through a combination of three company-owned and twenty-seven
independent agency locations across North America.
PH2 1076319v1 10/03/12
F-13
Contingent consideration associated with the acquisition of Adcom included "Tier-1 Earn-Out Payments" of up to
$700,000 annually, covering the four year earn-out period through June 30, 2012, based upon Adcom achieving
certain levels of "Gross Profit Contribution" (as defined in the SPA), payable 50% in cash and 50% in shares of
Company common stock (valued at delivery date); and a "Tier-2 Earn-Out Payment" of up to $2,000,000, equal to
20% of the amount by which the Adcom cumulative Gross Profit Contribution exceeds $16,560,000 during the four
year earn-out period. The Tier-1 Earn-Out Payments and certain amounts of the Tier-2 Payments may be subject to
acceleration upon occurrence of a "Corporate Transaction" (as defined in the SPA), which includes a sale of Adcom
or the Company, or certain changes in corporate control.
Through the final earn-out period ended June 30, 2012, the former Adcom shareholders earned a total of $2,318,365
in base earn-out payments. Of this amount, $887,083 was paid in cash and $567,058 was settled in stock through the
year ended June 30, 2012. The remaining amount of $864,224 is included in the amount due to former shareholders
of acquired operations as of June 30, 2012, and is expected to be paid out 50% in cash and 50% in Company stock in
October 2012.
No Tier II payments were earned under the SPA.
NOTE 5 - ACQUISITION OF DBA DISTRIBUTION SERVICES, INC.
On April 6, 2011, the Company closed on an Agreement and Plan of Merger (the "DBA Agreement") pursuant to
which the Company acquired DBA Distribution Services, Inc. ("DBA"), a privately-held New Jersey corporation
founded in 1981. At the time of the acquisition DBA serviced a diversified account base including manufacturers,
distributors and retailers through a combination of company-owned logistics offices located in Somerset, New
Jersey and Los Angeles, California and twenty-four agency offices located across North America. For financial
accounting purposes, the transaction was deemed to be effective as of April 1, 2011. The shares of DBA were
acquired by the Company via a merger transaction pursuant to which DBA was merged into a newly-formed
subsidiary of the Company. The $12.0 million purchase price consisted of $5.4 million paid in cash at closing, the
delivery of $4.8 million in Company notes (payable in principal installments of $1.6 million on the anniversary date
over the next three years plus interest at a rate of 6.5% per annum) and $1.8 million payable in cash in connection
with the achievement of certain integration milestones. The integration payment is included in the amount due to
former shareholders of acquired operations and is to be paid within 180 days after the milestones have been
achieved; however, no later than the 18th month following the closing. In May 2011, the Company elected to satisfy
$2.4 million of the Company notes through the issuance of 1,071,429 shares of the Company's common stock. Of
the remaining notes payable, $865,816 was paid during the year ended June 30, 2012, and $767,092 is payable
during each of the years ending June 30, 2013 and 2014. The remaining Company notes may be subject to
acceleration upon occurrence of a “Corporate Transaction” (as defined in notes), which includes a future sale of
DBA or the Company, or certain changes in corporate control. The cash component of the transaction was financed
through a combination of our existing funds and funds available under a revolving credit facility provided by Bank
of America, N.A.
Associated with the acquisition of DBA, the Company incurred $1,018,298 and $582,762 of non-recurring transition
costs for the years ended June 30, 2012 and 2011, respectively, consisting principally of personnel, general and
administrative costs which are being eliminated in connection with the winding down of DBA's historical back-
office operations and transitioning them to the corporate headquarters. These costs are reported as a separate line
item on the face of the Company's consolidated statement of income for the years ended June 30, 2012 and 2011.
In February 2012, we initiated an arbitration action asserting certain claims for indemnification against the former
shareholders of DBA under the DBA Agreement dated March 29, 2011, relating to, among others, the failure to
identify certain purchased transportation charges and related party transactions, as well as the breach of certain non-
competition and non-solicitation covenants by one of the DBA selling shareholders and a former DBA employee
affiliated with such selling shareholder.
NOTE 6 - ACQUISITION OF ISLA INTERNATIONAL, LTD.
On December 1, 2011, through a wholly-owned subsidiary, RGL, the Company acquired substantially all of the
assets of Laredo, Texas based Isla International, Ltd. ("Isla"), a privately-held company founded in 1996. At the
time of the acquisition, Isla provided bilingual expertise in both north and south bound cross-border transportation
and logistics services to a diversified account base including manufacturers in the automotive, appliance, electronics
and consumer packaged goods industries from its strategically-aligned location in Laredo, Texas and will serve as
the Company’s gateway to the Mexico markets. The transaction was structured as an asset purchase and valued at up
to approximately $15.0 million, consisting of: (i) cash of $7.657 million paid at closing; (ii) $1.325 million paid
through the issuance of 552,333 shares of our restricted stock on the three-month anniversary of the closing (valued
based upon a 30-day volume weighted average price calculated preceding the delivery of the shares); (iii) up to
$3.975 million in aggregate "Tier-1 Earn-Out Payments" covering the four-year earn-out period immediately
PH2 1076319v1 10/03/12
F-14
following closing, based upon the acquired Isla business unit generating a "Modified Gross Profit Contribution" (as
defined within the Asset Purchase Agreement) of $6.928 million for each twelve month earn-out period following
closing; and (iv) a "Tier-2 Earn-Out Payment" after the fourth anniversary of the closing, equal to 20% of the
amount by which the aggregate "Modified Gross Profit Contribution" of the acquired Isla business unit during the
four-year earn-out period exceeds $27.711 million, with such payment not to exceed $2.0 million. The various Tier-
1 Earn-Out Payments and the Tier-2 Earn-Out Payment shall be made in a combination of cash and our common
stock, as we may, at our sole discretion, elect to satisfy up to 25% of each of the earn-out payments through the
issuance of our common stock valued based upon a 30-day volume weighted average price to be calculated
preceding the delivery of the shares.
The transaction was financed through the net proceeds made available through the issuance of $10.0 million in
subordinated debt. As well, in connection with the transaction, the Company entered into an amended and restated
revolving credit facility with the Company's senior lender, Bank of America, N.A.
The total recorded purchase price consisted of an initial cash payment of $7.657 million, $1.325 million paid
through the issuance of 552,333 shares of our restricted stock, and estimated contingent consideration associated
with the Tier-1 and Tier-2 earn-outs of $4.075 million. The following table summarizes the allocation of the
purchase price based on the estimated fair value of the acquired assets and liabilities at December 1, 2011:
Furniture and equipment
Intangibles
Goodwill
Total assets acquired
$
112,736
7,847,976
5,095,870
$
13,056,582
The goodwill recognized is attributable primarily to the strategic location of the Isla operation along the U.S.-
Mexico border, allowing Isla to serve as the Company's gateway to Mexico and a strategic differentiator in the
marketplace. The goodwill recorded is expected to be deductible for income tax purposes over a period of 15 years.
Since acquisition, ISLA produced $16.0 million in revenues and operating income before management fees of $1.3
million before factoring in other purchase accounting charges resulting from the acquisition.
If the acquisition had taken place effective July 1, 2010 the result would have produced combined revenue of $323.9
million and $324.1 million and combined net income of $2.7 million and $3.5 million for the years ended June 30,
2012 and 2011, respectively. The unaudited pro forma financial information presented is for informational purposes
only and is not indicative of the results of operations that would have been achieved if the acquisitions and any
borrowings undertaken to finance the acquisition had taken place at the beginning of fiscal 2011.
NOTE 7 - ACQUISITION OF BRUNSWICKS LOGISTICS, INC.
On February 27, 2012, through a wholly-owned subsidiary, RGL, the Company acquired substantially all of the
assets of New York based Brunswicks Logistics, Inc. d/b/a ALBS Logistics Company ("ALBS"), a privately-held
company founded in 1997. At the time of the acquisition, ALBS provided a full range of domestic and international
transportation and logistics services across North America to a diversified account base including manufacturers,
distributors and retailers from its strategic international gateway location at New York-JFK airport. The transaction
was structured as an asset purchase and valued at up to approximately $7.275 million, consisting of: (i) cash of
$2.655 million paid at closing, (ii) $295,000 paid through the issuance of 142,489 shares of our restricted stock on
the three-month anniversary of the closing (valued based upon a 30-day volume weighted average price calculated
preceding the delivery of the shares); (iii) up to $3.325 million in aggregate "Tier-1 Earn-Out Payments" covering
the four-year earn-out period immediately following closing; and (iv) a "Tier-2 Earn-Out Payment" after the fourth
anniversary of the closing, with such payment not to exceed $1.0 million.
The transaction was financed with proceeds from the credit facility with Bank of America, N.A.
The total recorded purchase price consisted of an initial cash payment of $2.655 million, $295,000 paid through the
issuance of 142,489 shares of our restricted stock, and estimated contingent consideration associated with the Tier-1
and Tier-2 earn-outs of $3.025 million. The following table summarizes the allocation of the purchase price based
on the estimated fair value of the acquired assets and liabilities at February 27, 2012:
PH2 1076319v1 10/03/12
F-15
Prepaid expenses
Intangibles
Goodwill
Total assets acquired
$
2,750
3,631,135
2,341,115
$
5,975,000
The goodwill recognized is attributable primarily to the strategic location of the ALBS operation at New York-JFK
airport, allowing ALBS to serve as the Company's gateway to international partners around the world and a strategic
differentiator in the marketplace. The goodwill recorded is expected to be deductible for income tax purposes over a
period of 15 years.
Since acquisition, ALBS produced $6.5 million in revenues and operating income before management fees of
$224,000 before factoring in other purchase accounting charges resulting from the acquisition.
If the acquisition had taken place effective July 1, 2010 the result would have produced combined revenue of $323.9
million and $324.1 million and combined net income of $2.7 million and $3.5 million for the years ended June 30,
2012 and 2011, respectively. The unaudited pro forma financial information presented is for informational purposes
only and is not indicative of the results of operations that would have been achieved if the acquisitions and any
borrowings undertaken to finance the acquisition had taken place at the beginning of fiscal 2011.
NOTE 8 - ACQUIRED INTANGIBLE ASSETS
The table below reflects acquired intangible assets related to the acquisitions of Airgroup, Automotive Services
Group, Adcom, DBA, Isla, and ALBS:
Year ended
June 30, 2012
Year ended
June 30, 2011
Gross
carrying
amount
Accumulated
Amortization
Gross
carrying
amount
Accumulated
Amortization
$
$
18,712,673 $
420,000
19,132,673 $
133,996
7,275,865 $ 7,533,562 $
120,000
7,409,861 $ 7,653,562 $
4,702,100
71,616
4,773,716
$
$
$
$
2,636,145
941,473
3,198,350
2,174,175
1,715,511
2,852,403
1,782,373
11,722,812
Amortizable intangible assets:
Customer related
Covenants not to compete
Total
Aggregate amortization
expense:
For the year ended June 30,
2012
For the year ended June 30,
2011
Aggregate amortization expense
for the years ended June 30:
2013
2014
2015
2016
2017
Total
PH2 1076319v1 10/03/12
F-16
NOTE 9 - FAIR VALUE MEASUREMENTS
The following table sets forth the Company’s financial liabilities measured at fair value on a recurring basis:
Contingent consideration
Fair Value Measurements as of June 30, 2012
Level 3
Total
$
6,200,000 $
6,200,000
The fair value of the contingent consideration was estimated using projected future operating results and the
corresponding future earn-out payments. To calculate fair value, the future earn-out payments were then discounted
using Level 3 inputs. The Company believes the discount rate used to discount the earn-out payments reflect market
participant assumptions.
The following table provides a reconciliation of the beginning and ending liabilities for the liabilities measured at
fair value using significant unobservable inputs (Level 3):
Contingent
consideration
Balance, July 1, 2011
Increase related to accounting for acquisitions
Change in fair value
Balance, June 30, 2012
NOTE 10 - VARIABLE INTEREST ENTITY
$
$
-
7,100,000
(900,000 )
6,200,000
Certain entities in which equity investors do not have the characteristics of a controlling financial interest or do not
have the sufficient equity at risk for the entity to finance its activities without additional subordinated financial
support from other parties are considered "variable interest entities". RLP is 40% owned by Radiant Global
Logistics ("RGL"), qualifies as a variable interest entity and is included in the Company’s consolidated financial
statements (see Note 11). RLP commenced operations in February 2007. Net income attributable to the non-
controlling interest recorded on the statements of income was $177,794 and $159,209 for the years ended June 30,
2012 and 2011, respectively.
The following table summarizes the balance sheets of RLP as of June 30:
ASSETS
Accounts receivable
Accounts receivable – Radiant Logistics
Prepaid expenses and other current assets
Total assets
LIABILITIES AND PARTNERS' CAPITAL
Other accrued costs
Total liabilities
Partners' capital
Total liabilities and partners' capital
NOTE 11 - RELATED PARTY
2012
2011
183,987
1,947
1,226 $ 2,012
170,030
1,191
187,160 $ 173,233
24,575 $ 16,971
16,971
24,575
162,585
156,262
187,160 $ 173,233
$
$
$
$
RLP is owned 40% by RGL and 60% by Radiant Capital Partners, LLC ("RCP"), a company for which the Chief
Executive Officer of the Company is the sole member. RLP is a certified minority business enterprise which was
formed for the purpose of providing the Company with a national accounts strategy to pursue corporate and
government accounts with diversity initiatives. RCP’s ownership interest entitles it to a majority of the profits and
distributable cash, if any, generated by RLP. The operations of RLP are intended to provide certain benefits to the
Company, including expanding the scope of services offered by the Company and participating in supplier diversity
programs not otherwise available to the Company. In the course of evaluating and approving the ownership
structure, operations and economics emanating from RLP, a committee consisting of the independent Board member
of the Company, considered, among other factors, the significant benefits provided to the Company through
association with a minority business enterprises, particularly as many of the Company’s largest current and potential
customers have a need for diversity offerings. In addition, the Committee concluded that the economic relationship
with RLP was on terms no less favorable to the Company than terms generally available from unaffiliated third
parties. RLP is consolidated in the financial statements of the Company (see Note 10).
PH2 1076319v1 10/03/12
F-17
For the year ended June 30, 2012, RLP recorded $296,323 in profits, of which Mr. Crain’s distributable share was
$177,794. For the year ended June 30, 2011, RLP recorded $265,349 in profits, of which Mr. Crain’s distributable
share was $159,209.
NOTE 12 - FURNITURE AND EQUIPMENT
Vehicles
Communication equipment
Office equipment
Furniture and fixtures
Computer equipment
Computer software
Leasehold improvements
Less: Accumulated depreciation and amortization
Furniture and equipment, net
June 30,
2012
June 30,
2011
$
$
30,288 $
30,006
529,716
212,058
715,854
1,698,123
846,659
4,062,704
(2,327,547 )
1,735,157 $
33,788
31,359
511,872
122,488
733,819
1,283,581
641,188
3,358,095
(1,930,032 )
1,428,063
Depreciation and amortization expense related to furniture and equipment was $506,704 and $383,816 for the years
ended June 30, 2012 and 2011, respectively.
NOTE 13 - NOTES PAYABLE AND OTHER LONG-TERM DEBT
Notes payable and other long-term debt consist of the following:
Notes Payable – Caltius
Less: Original Issue Discount, net
Less: Debt Issuance Costs, net
Total Caltius Senior Subordinated Notes, net
Notes Payable – DBA shareholders
Long-Term Credit Facility
Total notes payable and other long-term debt
Less: Current portion
Total notes payable and other long-term debt
June 30,
2011
$
June 30,
2012
10,000,000 $
(1,081,739 )
(586,816 )
-
-
-
8,331,445
1,534,183
11,434,398
-
2,400,000
10,269,268
21,300,026
(767,092 )
20,532,934 $
12,669,268
(800,000 )
11,869,268
$
Future maturities of notes payable and other long-term debt for the years ending June 30 are as follows:
2013
2014
2015
2016
2017
$
767,092
12,201,489
-
-
10,000,000
$
22,968,581
PH2 1076319v1 10/03/12
F-18
Bank of America – Credit Facility
Effective December 1, 2011, the Company entered into an agreement (the "Loan Agreement") with Bank of
America, N.A. (the "Lender"). Under the Loan Agreement, the Lender provided the Company with a $20.0 million
senior secured credit facility, including a $1.0 million sublimit to support letters of credit (collectively, the "Credit
Facility"). Advances under the Credit Facility are available to fund future acquisitions, capital expenditures or for
other corporate purposes. The Credit Facility had the effect of amending and fully restating our pre-existing senior
credit facility with the Lender as amended from time to time, to accommodate the subordinated debt provided by
Caltius, as described below. Borrowings under the Credit Facility accrue interest, at the Company’s option, at the
Lender's prime rate minus 0.75% to plus 0.50% or LIBOR plus 1.75% to 3.00%, and can be adjusted up or down
during the term of the Credit Facility based on the Company’s performance relative to certain financial covenants.
The Credit Facility has a maturity date of November 30, 2013, and is collateralized by the Company's accounts
receivable and other assets of its subsidiaries. Advances under the Credit Facility of up to 80% of eligible domestic
accounts receivable and up to 60% of eligible foreign accounts receivable are available to fund future acquisitions,
capital expenditures or for other corporate purposes.
The terms of the Credit Facility are subject to certain financial and operational covenants that may limit the amount
otherwise available under the Credit Facility. The first financial covenant limits the Company's ratio of "Funded
Debt" (as defined therein) to consolidated EBITDA (as adjusted) and measured on a rolling four quarter basis to
4.00 to 1, reducing to 3.75 to 1 at December 31, 2012, reducing to 3.5 to 1 at December 31, 2013, and reducing to
3.25 to 1 at December 31, 2014. The second financial covenant limits the Company's ratio of Senior Debt (defined
as amounts borrowed from the Bank) to consolidated EBITDA (as adjusted) and measured on a rolling four quarter
basis to 2.50 to 1 and reducing to 2.25 to 1 on December 31, 2012. The third financial covenant requires the
Company maintain a basic fixed charge coverage ratio of at least 1.25 to 1.0. The fourth financial covenant is a
minimum profitability standard which requires the Company not to incur a net loss before taxes, amortization of
acquired intangibles and extraordinary items in any two consecutive quarterly accounting periods.
Under the terms of the Credit Facility, the Company is permitted to make additional acquisitions without the consent
of the Lender, only if certain conditions are satisfied. The conditions imposed by the Credit Facility include the
following: (i) the absence of an event of default under the Credit Facility; (ii) the company to be acquired must be in
the transportation and logistics industry; (iii) the purchase price to be paid must be consistent with the Company’s
historical business and acquisition model; (iv) after giving effect for the funding of the acquisition, the Company
must have undrawn availability of at least $4.0 million under the Credit Facility; (v) the Lender must be reasonably
satisfied with projected financial statements the Company provides covering a twelve month period following the
acquisition; (vi) the acquisition documents must be provided to the Lender and must be consistent with the
description of the transaction provided to the Lender; and (vii) the number of permitted acquisitions is limited to
three per fiscal year and the aggregate cash consideration payable at closing shall not exceed $7.5 million for any
single transaction and $12.5 million in the aggregate, provided however the foregoing limitation shall exclude cash
consideration derived from the proceeds of sales of newly issued equity interests of the Company during the nine
month period prior to the closing of any such transaction and the aggregate consideration at closing is not more than
$25.0 million. In the event the Company is not able to satisfy the conditions of the Credit Facility in connection with
a proposed acquisition, the Company must either forego the acquisition, obtain the Lender's consent, or retire the
Credit Facility.
The co-borrowers of the Credit Facility include Radiant Logistics, Inc., RGL (f/k/a Airgroup Corporation), Adcom
(d/b/a Adcom Worldwide), DBA (d/b/a Distribution by Air), RTS (f/k/a Radiant Logistics Global Services, Inc.),
RCS and RLP. As a co-borrower under the Credit Facility, the accounts receivable of RLP are eligible for inclusion
within the overall borrowing base of the Company and all borrowers will be responsible for repayment of the debt
associated with advances under the Credit Facility, including those advanced to RLP. At June 30, 2012, the
Company was in compliance with all of its covenants.
As of June 30, 2012, the Company had $7,159,159 in advances under the Credit Facility and $4,275,239 in
outstanding checks, which had not yet been presented to the bank for payment. The outstanding checks have been
reclassed from cash as they will be advanced from, or against, the Credit Facility when presented for payment to the
bank. These amounts total the balance of other long-term debt in the consolidated balance sheet of $11,434,398 .
As of June 30, 2011, the Company had $7,777,017 in advances under the Credit Facility and $2,492,251 in
outstanding checks, which had not yet been presented to the bank for payment. The outstanding checks have been
reclassed from cash as they will be advanced from, or against, the Credit Facility when presented for payment to the
bank. These amounts total the balance of other long-term debt in the consolidated balance sheet of $10,269,268.
At June 30, 2012, based on available collateral and $491,800 in outstanding letter of credit commitments, there was
$12,349,041 available for borrowing under the Credit Facility based on advances outstanding.
PH2 1076319v1 10/03/12
F-19
Caltius Senior Subordinated Notes
In connection with the Company’s acquisition of Isla, the Company entered into an Investment Agreement with
Caltius Partners IV, LP and Caltius Partners Executive IV, LP (collectively, "Caltius"). Under the Investment
Agreement, Caltius provided the Company with a $10.0 million aggregate principal amount evidenced by the
issuance of senior subordinated notes (the "Senior Subordinated Notes"), the net proceeds of which were primarily
used to finance the cash payments due at closing of the Isla transaction. The Senior Subordinated Notes accrue
interest at the rate of 13.5% per annum (the "Accrual Rate"), and must be paid currently in cash on a quarterly basis
at a rate of 11.75% per annum (the "Pay Rate"). The outstanding principal balance of the Senior Subordinated Notes
will be increased by an amount (the "PIK Amount") equal to the difference between interest accrued at the Accrual
Rate and Interest Accrued at the Pay Rate unless the Company makes an election to pay the PIK Amount in cash.
The Company has exercised its option to pay all PIK in cash. The Senior Subordinated Notes are non-amortizing,
with all principal due upon maturity at December 1, 2016.
Under the Investment Agreement, the Company also issued 500,000 restricted shares of Company common stock to
Caltius, which was recorded as an original issue discount and is being amortized over the term of the note using the
effective interest method.
The terms of the Investment Agreement are subject to certain customary affirmative and negative covenants. These
include, but are not limited to, restrictions on: (i) types and amounts of indebtedness that can be incurred;
(ii) dividends that can be paid; (iii) distributions that can be made; (iv) certain asset sales, lease commitments,
capital expenditures, acquisitions and investments. In addition, the Investment Agreement prohibits the Company
from incurring any earn-out obligations or seller notes in connection with any future acquisitions, unless explicitly
subordinated to the Senior Subordinated Notes, or, in general, any indebtedness that is subordinated to the Credit
Facility, unless such indebtedness is also subordinated to the Senior Subordinated Notes.
The Investment Agreement contains financial covenants including, but not limited to, funded leverage ratio
covenants, senior funded leverage ratio covenants and fixed charges ratio covenants. The first financial covenant
limits our ratio of "Funded Debt" (as defined therein) to consolidated EBITDA (as adjusted) and measured on a
rolling four quarter basis to 4.25 to 1, reducing to 4.00 to 1 at March 31, 2013, reducing to 3.75 to 1 at March 31,
2014 and reducing to 3.50 to 1 at March 31, 2015. The second financial covenant limits the Company's ratio of
Senior Debt (defined as amounts borrowed from the Bank and the Senior Subordinated Notes) to consolidated
EBITDA (as adjusted) and measured on a rolling four quarter basis to 3.75 to 1, reducing to 3.50 to 1 on March 31,
2013, reducing to 3.25 to 1 on March 31, 2014 and reducing to 3.00 to 1 on March 31, 2015. The third financial
covenant requires that the Company maintains a basic fixed charge coverage ratio of at least 1.05 to 1.0. At June 30,
2012, we were in compliance with all of our covenants.
Under the Investment Agreement, the Company is permitted to make additional acquisitions only if certain
conditions are satisfied, including the following: (i) the acquisition constitutes a business reasonably related to its
then current business; (ii) no default or event of default shall exist prior to or will be caused as a result of such
acquisition; (iii) Caltius has been provided with prior written notice of such acquisition, such notice to include (a) a
description of the property or equity interests to be purchased, (b) the price and terms of such acquisition, (c) a
certificate of a financial officer, certifying as to certain information requested in the Investment Agreement, and (d)
such other information with respect thereto as is reasonably requested by Caltius; (iv) in the event of an acquisition
of equity interests of a company, such company shall become a wholly-owned subsidiary; (v) the target company
shall have as of the last day of the most recent fiscal quarter of such company ending on or immediately prior to the
date of such acquisition actual (or pro forma to the extent approved in writing by Caltius) EBITDA and net income
greater than $1, in each case for the 12 month period ending on such date; (vi) the aggregate cash consideration
payable at the closing of the acquisition shall not exceed $7.5 million for any single transaction and $12.5 million in
the aggregate in any fiscal year or such other amount approved in writing by the Caltius; provided, however, that (a)
the foregoing limitation shall exclude cash consideration derived from the proceeds of sales of equity interests
issued by the Company during the nine-month period prior to the closing of such acquisition to the extent the
Company notifies Caltius in writing of the use of such cash consideration from sales such equity interests in such
transaction or transactions and (b) the written consent of Caltius shall be required if the aggregate cash consideration
payable at the closing of such transaction is equal to or greater than $25.0 million; (vii) the post-closing availability
under the Credit Facility is at least $4.0 million on a pro forma basis; (viii) the number of permitted acquisitions that
the Company and its co-borrowers have completed in such fiscal year does not exceed three; and (ix) the Company
shall have provided to Caltius certain deliverables for such acquisition.
PH2 1076319v1 10/03/12
F-20
The Investment Agreement contains a number of events of default, certain of which are typical for transactions of
this type, including, without limitation, the following events: (i) failure to pay amounts due under the Senior
Subordinated Notes; (ii) a breach of any representation or warranty contained in the Investment Agreement or
related documents; (iii) failure to comply with or perform certain covenants under the Investment Agreement;
(iv) any material default under any of our indebtedness or that of the co-borrowers, including unsatisfied judgments,
in excess of agreed upon per item and aggregate amounts; (v) the bankruptcy, insolvency or the appointment of a
receiver; (vi) the dissolution, liquidation, winding-up or termination of the Company or any of the co-borrowers;
(vii) the Company or any co-borrower suspends or is enjoined, restrained or in any way prevented by the order of
any governmental authority from conducting all or any material part of its business for more than 30 calendar days;
or (viii) Bohn Crain ceases to serve as the Chief Executive Officer of the Company and the Company does not
appoint a successor acceptable to Caltius within 30 days after the date on which Bohn Crain is no longer serving as
the Chief Executive Officer.
The Company or its subsidiaries may, however, acquire at least 51% of the equity of another entity (“Permitted
Investment”) so long as (i) the aggregate consideration for all such Permitted Investments does not exceed $1.0
million, (ii) the Company (or its subsidiary, as applicable) controls and owns at least 51% of the acquired entity, and
(iii) the Company (or its subsidiary, as applicable) complies with all of the requirements of the foregoing paragraph,
other than the requirements set forth in sections (iv) and (vi).
The co-borrowers under the Investment Agreement include Radiant Logistics, Inc., RGL (f/k/a Airgroup
Corporation), Adcom (d/b/a Adcom Worldwide), DBA (d/b/a Distribution by Air), Radiant Transportation Services
("RTS", f/k/a Radiant Logistics Global Services, Inc.), Radiant Customs Services, Inc. ("RCS") and RLP.
In connection with the Caltius financing and effective as of December 1, 2011, the Company also entered into an
Investor Rights Agreement with Caltius under which the Company agreed to provide limited registration rights
covering the Caltius Shares and agreed to certain contingent redemption rights regarding the Caltius Shares. Under
the Investor Rights Agreement, Caltius has the right to cause the Company to redeem the Caltius Shares at their then
appraised fair market value if (subject to certain notice and cure periods): (a) the Company’s shares of common
stock are no longer listed and registered, quoted or eligible for quotation, on an exchange or automated quotation
system; (b) the Company has been unable to timely file all periodic reports required by the Securities Exchange Act
of 1934; and (c) the Company has otherwise been unable to satisfy our registration rights requirements regarding the
Caltius Shares.
Under the Investor Rights Agreement, the Company agreed to provide demand registration rights covering the
Caltius Shares through the end of the first anniversary of the closing in the limited instances that the Company are
either no longer current in our periodic reports required by the Securities Exchange Act of 1934, or the Company is
otherwise unable to maintain the listing of its shares on the exchange or automated quotation system upon which
they currently trade. The Company also agreed to provide "piggyback" registration rights on customary and standard
terms until the earlier of: (i) such time that Caltius no longer owns any of the Caltius Shares; or (ii) the tenth
anniversary of the date of the Investor Rights Agreement. The Company has agreed to provide Caltius with
customary rights of indemnification and to cover certain of the expenses associated with the registration of the
Caltius Shares. The demand and piggyback registration rights granted are subject to standard and customary rights
of deferral, underwriter cut-back, and black-out periods.
DBA – Notes Payable
In connection with the DBA acquisition, the Company issued notes payable in the amount of $4.8 million payable to
the former shareholders of DBA. The notes accrue interest at a rate of 6.5%, and such interest is payable on a
quarterly basis. The principal amount of the notes is payable annually on March 31 in three equal payments. The
Company has repaid a portion of the note early in the amount of $98,725 in connection with termination of some
former DBA employees who were also shareholders.
The notes contain an optional forced conversion right which allowed the Company, in its sole discretion on or before
the expiration of the third month following three month anniversary of the closing date, to elect to satisfy up to $2.4
million of the notes by the issuance of Company common stock. Accordingly, in May 2011, the Company elected to
satisfy $2.4 million of the notes through the issuance of 1,071,429 shares of the Company's common stock.
PH2 1076319v1 10/03/12
F-21
NOTE 14 - PROVISION FOR INCOME TAXES
Current deferred tax assets:
Allowance for doubtful accounts
Accruals
Total current deferred tax assets
Long-term deferred tax assets (liabilities):
Stock-based compensation
Fixed asset basis differences
Goodwill deductible for tax purposes
Intangibles
Other, net
Net long-term deferred tax assets (liabilities)
Income tax expense attributable to operations is as follows:
Current:
Federal
State
Deferred:
Federal
State
June 30,
2012
June 30,
2011
$
$
$
$
498,435 $
185,796
684,231 $
605,049
537,028
1,142,077
431,009 $
(483,486 )
459,554
(493,345 )
119,527
33,259 $
346,884
(259,023 )
520,572
(1,094,340 )
-
(485,907 )
Year ended
June 30,
2012
Year ended
June 30,
2011
$
1,374,450 $
161,700
1,909,493
224,646
(54,865 )
(6,455 )
(97,210 )
(11,437 )
Net income tax expense
$
1,474,830 $
2,025,492
The following table reconciles income taxes based on the U.S. statutory tax rate to the Company’s income tax
expense:
Tax expense at statutory rate
Permanent differences
Change in income taxes due to IRS audit
State income taxes
Other
$
Year ended
June 30,
2012
1,147,912 $
29,939
59,013
162,235
75,721
Year ended
June 30,
2011
1,658,219
15,144
-
213,209
138,920
Net income tax expense
$
1,474,820 $
2,025,492
Tax years which remain subject to examination by federal and state authorities are the years ended June 30, 2009
through June 30, 2012.
NOTE 15 - CONTINGENCIES
Legal Proceedings
In December 2010, the Company recorded a charge of $150,000 in connection with the settlement of a dispute with
one of its competitors related to the 2007 departure of the competitor’s then Chicago operation. By agreement
among the parties, without admission of any wrong doing on the part of the Company and with affirmation of the
parties’ right to freely compete in the marketplace, the Company agreed to make a $150,000 donation to a mutually
agreeable IRC 503(c) charitable organization. Neither the Company nor its competitor received any payment in
connection with the settlement. Of this amount, $75,000 was paid during each of the years ending June 30, 2012 and
2011.
PH2 1076319v1 10/03/12
F-22
In February 2012, we initiated an arbitration action asserting certain claims for indemnification against the former
shareholders of DBA under the Agreement and Plan of Merger dated March 29, 2011, relating to, among others, the
failure to identify certain purchased transportation charges and related party transactions, as well as the breach of
certain non-competition and non-solicitation covenants by one of the DBA selling shareholders and a former DBA
employee affiliated with such selling shareholder.
Contingent Consideration and Earn-out Payments
The Company’s agreements with respect to the acquisitions of Isla (See Note 6) and ALBS (See Note 7) contain
future consideration provisions which provide for the selling shareholder to receive additional consideration if
specified operating objectives and financial results are achieved in future periods, as defined in their respective
agreements. Any changes to the fair value of the contingent consideration are recorded in the consolidated
statements of income. Earn-out payments are generally due annually on November 1, and 90 days following the
quarter after the fourth anniversary of the acquisition date.
The following table represents the estimated earn-out payments to be paid in each of the following fiscal years:
Earn-out payments:
Cash
Equity
$
Total estimated earn-out payments (1) $
2013
2014
2015
2016
Total
432
432
864
$ 609
59
$ 668
$ 1,628
276
$ 1,904
$ 3,386
655
$ 4,041
$ 6,055
1,422
$ 7,477
(1)
The Company generally has the right but not the obligation to satisfy a portion of the earn-out payments in
stock.
Finder's Fee Arrangements
In fiscal year 2007, the Company entered into finder’s fee arrangements with third parties to assist the Company in
locating logistics businesses that could become exclusive agent operations of the Company and/or candidates for
acquisition. Any amounts due under these arrangements are payable as a function of the financial performance of
any newly acquired operation and are conditioned payable upon, among other things, the retention of any newly
acquired operations for a period of not less than 12 months. Payment of the finder’s fee may be paid in cash,
Company shares, or a combination of cash and shares. For the years ended June 30, 2011, the Company paid
$10,445 in satisfaction of finder’s fee obligations. There were no finder’s fees paid during 2012.
NOTE 16 - STOCKHOLDERS’ EQUITY
Preferred Stock
The Company is authorized to issue 5,000,000 shares of preferred stock, par value at $.001 per share. As of June 30,
2012 and 2011, none of the shares were issued or outstanding.
Common Stock Repurchase Program
During 2009, the Company 's Board of Directors approved a stock repurchase program, pursuant to which up to
5,000,000 shares of its common stock could be repurchased under the program through December 31, 2010. Under
this repurchase program, the Company purchased 1,490,740 shares of its common stock at a cost of $471,265 during
the year ended June 30, 2011. The 4,919,239 shares held in treasury were retired during the year ended June 30,
2012.
PH2 1076319v1 10/03/12
F-23
NOTE 17 - SHARE-BASED COMPENSATION
On October 20, 2005, the Company’s shareholders approved the Company’s 2005 Stock Incentive Plan ("2005
Plan). The 2005 Plan authorizes the granting of awards, the exercise of which would allow up to an aggregate of
5,000,000 shares of the Company’s common stock to be acquired by the holders of said awards. Awards under the
2005 Plan can take the form of incentive stock options ("ISOs") or nonqualified stock options ("NSOs” and together
with ISOs, collectively, the “Options") and may be granted to key employees, directors and consultants. Options
shall be exercisable at such time or times, or upon such event, or events, and subject to such terms, conditions,
performance criteria, and restrictions as shall be determined by the plan administrator and set forth in the Option
Agreement evidencing such Option; provided, however, that (i) no Option shall be exercisable after the expiration of
ten (10) years after the date of grant of such Option, (ii) no Incentive Stock Option granted to a participant who
owns more than 10% of the combined voting power of all classes of stock of the Company (or any parent or
subsidiary of the Company) shall be exercisable after the expiration of five (5) years after the date of grant of such
Option, and (iii) no Option granted to a prospective employee, prospective consultant or prospective director may
become exercisable prior to the date on which such person commences Service with the Participating Company.
Subject to the foregoing, unless otherwise specified by the Option Agreement evidencing the Option, any Option
granted under the 2005 Plan shall have a term of ten (10) years from the effective date of grant of the Option.
The price at which each share covered by an Option may be purchased shall be determined in each case by the plan
administrator; provided, however, that such price shall not, in the case of an Incentive Stock Option, be less than the
fair market value of the underlying stock at the time the Option is granted. If a participant owns (or is deemed to
own under applicable provisions of the Code and rules and regulations promulgated hereunder) more than ten
percent (10%) of the combined voting power of all classes of the stock of the Company and an Option granted to
such participant is intended to qualify as an Incentive Stock Option, the Option price shall be no less than 110% of
the fair market value of the stock covered by the Option on the date the Option is granted.
Fair market value of the stock on any given date means (i) if the stock is listed on any established stock exchange, its
fair market value shall be the closing sales price for such stock (or the closing bid, if no sales were reported) as
quoted on such exchange for the last market trading day prior to the time of determination, as reported in The Wall
Street Journal or such other source as the Administrator deems reliable; (ii) if the stock is regularly traded on the
OTC Bulletin Board Service or a comparable automated quotation system, its fair market value shall be the mean
between the high bid and low asked prices for the stock on the last market trading day prior to the day of
determination; or (iii) in the absence of an established market for the stock, the fair market value thereof shall be
determined in good faith by the plan administrator.
Under the 2005 Plan, stock options were granted to employees and are exercisable in whole or in part at stated times
from the date of grant up to ten years from the date of grant. During the year ended June 30, 2012, 1,094,278 stock
options were granted to employees at a weighted average exercise price of $2.25 per share. During the year ended
June 30, 2011, 245,242 stock options were granted to employees at a weighted average exercise price of $1.66 per
share. The Company recorded share-based compensation expense of $225,991 and $115,346 for the years ended
June 30, 2012 and 2011, respectively.
The following table reflects activity under the plan:
Year ended
June 30, 2012
Year ended
June 30, 2011
Granted
Shares
Weighted Average
Exercise Price
Granted
Shares
Weighted Average
Exercise Price
Outstanding at beginning of year
Granted
Exercised
Forfeited
Outstanding at end of year
Exercisable at end of year
Non-vested at end of year
$
3,865,242
1,094,278
(20,130)
(66,216)
4,873,174 $
3,261,834 $
1,611,340 $
0.58
2.25
(0.28)
(0.58)
0.95
0.55
1.76
3,620,000 $
245,242
-
-
3,865,242 $
3,004,000 $
861,242 $
0.50
1.66
-
-
0.58
0.55
0.68
PH2 1076319v1 10/03/12
F-24
The fair value of each stock option grant is estimated as of the date of grant using the Black-Scholes option pricing
model with the following weighted average assumptions:
Risk-Free Interest Rates
Expected Term
Expected Volatility
Expected Dividend Yields
Forfeiture Rate
Year ended
June 30, 2012
(0.82)%-(0.39) %
6.5yrs
58.8%-71.8 %
0.00 %
0.00 %
Year ended
June 30, 2011
0.16%-0.57 %
6.5yrs
59.5%-61.2 %
0.00 %
0.00 %
As of June 30, 2012, the Company had approximately $1,532,000 of total unrecognized share-based compensation
costs relating to unvested stock options which is expected to be recognized over a weighted average period of 2.76
years. The following table summarizes the Company’s unvested stock options and changes for the years ended June
30, 2012 and 2011.
Outstanding, July 1, 2010
Granted
Less: options vested
Less: options forfeited
Outstanding, June 30, 2011
Granted
Less: options vested
Less: options forfeited
Outstanding, June 30, 2012
Shares
1,340,000 $
245,242
(724,000 )
-
861,242 $
1,094,278
(292,964 )
(51,216 )
1,611,340 $
Weighted
Average Grant
Date Fair Value
0.24
0.92
(0.30 )
-
0.38
1.35
(0.33 )
(0.42 )
1.05
The following table summarizes outstanding and exercisable options by price range as of June 30, 2012:
Exercisable Options
Weighted
Average
Remaining
Contractual
Life-Years
Weighted
Average
Exercise
Price
$ .18 $
.25
.48
.73
1.01
1.30
-
2.30
-
$ 0.55 $
Aggregate
Intrinsic
Value at June
30, 2012
516,160
240,000
1,919,050
1,220,941
14,800
9,922
-
-
-
3,920,873
6.14
6.80
3.56
3.59
4.22
8.67
-
8.93
-
4.06
Number
Outstanding
at June 30,
2012
435,000
350,000
1,550,000
1,217,137
20,000
110,234
421,854
761,990
6,959
4,873,174
Weighted
Average
Remaining
Contractual
Life-Years
6.18
6.87
3.60
3.67
4.22
8.67
9.81
9.34
9.48
5.64
Weighted
Average
Exercise
Price
$ 0.18
0.26
0.48
0.73
1.01
1.30
2.07
2.35
2.40
$ 0.95
Aggregate
Intrinsic
Value at June
30, 2012
$ 684,950
522,500
1,963,500
1,245,908
14,800
49,605
-
-
-
$ 4,481,263
Number
Exercisable
at June 30,
2012
328,000
160,000
1,515,000
1,195,427
20,000
22,048
-
21,359
-
3,261,834
Exercise Prices
$0.00 - $0.19
$0.20 - $0.39
$0.40 - $0.59
$0.60 - $0.79
$1.00 - $1.19
$1.20 - $1.39
$2.00 - $2.19
$2.20 - $2.39
$2.40 - $2.59
Total
PH2 1076319v1 10/03/12
F-25
NOTE 18 - OPERATING AND GEOGRAPHIC SEGMENT INFORMATION
Operating segments are identified as components of an enterprise about which separate discrete financial
information is available for evaluation by the chief operating decision-maker, or decision-making group, in making
decisions regarding allocation of resources and assessing performance. The Company's chief decision-maker is the
Chief Executive Officer. The Company continues to operate in a single operating segment.
The Company’s geographic operations outside the United States include shipments to and from Canada, Central
America, Europe, Africa, Asia and Australia. The following data presents the Company’s revenue generated from
shipments to and from these locations for the United States and all other countries, which is determined based upon
the geographic location of a shipment's initiation and destination points (in thousands):
United States
Other Countries
Total
2012
2011
2012
2011
2012
2011
163,903 $ 113,911 $ 133,100 $ 89,909 $ 297,003 $ 203,820
106,052
141,315
57,851 $ 42,360 $ 26,858 $ 20,145 $ 84,709 $ 62,505
106,242
212,294
69,764
71,551
Year ended June 30:
Revenue
Cost of
transportation
Net revenue
$
$
NOTE 19 - QUARTERLY FINANCIAL DATA SCHEDULE (Unaudited)
Fiscal Year 2012 – Quarter Ended
June 30
March 31
December 31
September 30
Revenue
Cost of transportation
Net revenues
$
81,807,668 $ 70,748,655 $ 72,613,729 $ 71,833,044
50,594,124
58,903,273
50,431,819
52,365,148
22,904,395
20,316,836
20,248,581
21,238,920
Total operating expenses
20,947,780
20,017,722
19,142,383
20,120,318
Income from operations
1,956,615
299,114
1,106,198
1,118,602
Total other expense
(381,629 )
(371,493 )
(158,974 )
(14,425)
Income (loss) before income tax benefit
(expense)
1,574,986
(72,379 )
947,224
1,104,177
Income tax benefit (expense)
(631,117 )
45,732 )
(487,966 )
(401,469)
Net income (loss)
943,869
(26,647 )
459,258
702,708
Net income attributable to non-controlling
interest
Net income (loss) attributable to Radiant
Logistics, Inc.
$
(40,382 )
(47,970 )
(41,761 )
(47,681)
903,487 $ (74,617 ) $ 417,497 $ 655,027
Net income per common share – basic and
diluted
$
0.03 $ 0.00 $ 0.01 $ 0.02
PH2 1076319v1 10/03/12
F-26
Fiscal Year 2011 – Quarter Ended
June 30
March 31
December 31
September 30
Revenue
Cost of transportation
$
70,932,008 $
49,753,382
42,030,290 $
29,005,131
44,496,820 $
30,314,763
46,361,057
32,242,361
Net revenues
21,178,626
13,025,159
14,182,057
14,118,696
Total operating expenses
19,895,963
11,777,157
12,878,402
12,778,160
Income from operations
1,282,663
1,248,002
1,303,655
1,340,536
Total other income (expense)
(26,433 )
21,191
(123,142 )
(10,147)
Income before income tax expense
1,256,230
1,269,193
1,180,513
1,330,389
Income tax expense
(634,251 )
(472,379 )
(413,319 )
(505,543)
Net income
621,979
796,814
767,194
824,846
Net income attributable to non-
controlling interest
Net income attributable to Radiant
Logistics, Inc.
$
Net income per common share –
basic
Net income per common share –
diluted
$
$
(40,282 )
(26,095 )
(50,929 )
(41,903)
581,697 $
770,719 $
716,265 $
782,943
0.02 $
0.02 $
0.03 $
0.02 $
0.02 $
0.02 $
0.03
0.03
PH2 1076319v1 10/03/12
F-27
EXHIBIT INDEX
Exhibit No. Exhibit
21.1
23.1
31.1
31.2
32.1
Subsidiaries of the Registrant
Consent of Peterson Sullivan LLP
Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Section
906 of the Sarbanes-Oxley Act of 2002
101.INS*
XBRL Instance
101.SCH* XBRL Taxonomy Extension Schema
101.CAL* XBRL Taxonomy Extension Calculation
101.DEF* XBRL Taxonomy Extension Definition
101.LAB* XBRL Taxonomy Extension Label
101.PRE*
XBRL Taxonomy Extension Presentation
* XBRL information is furnished and not filed or part of a registration statement or prospectus of sections 11 or 12
of the Securities Act of 1933, as amended, is deemed not filed for purposes of section 18 of the Securities Exchange
Act of 1934, as amended, and otherwise is not subject to liability under these sections.
PH2 1076319v1 10/03/12
Subsidiaries of
Radiant Logistics, Inc.
Name of Subsidiary
Radiant Global Logistics, Inc. (formerly Airgroup Corporation)
Radiant Logistics Partners LLC
(40% owned by Radiant Global Logistics, Inc.)
Radiant Customs Services, Inc.,
Radiant Transportation Services, Inc. (formerly Radiant Logistics Global
Services, Inc.)
Adcom Express, Inc.
DBA Distribution Services, Inc.
Exhibit 21.1
State of Incorporation or
Organization
Washington
Delaware
Washington
Delaware
Minnesota
New Jersey
PH2 1076319v1 10/03/12
Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference into the Registration Statements on Form S-8 (File No. 333-179869,
effective March 2, 2012) and Form S-3 (File No. 333-179868, effective May 11, 2012) of our report dated
September 26, 2012, relating to our audit of the consolidated financial statements of Radiant Logistics, Inc.
appearing in the Annual Report on Form 10-K of Radiant Logistics, Inc. for the year ended June 30, 2012.
/S/ PETERSON SULLIVAN LLP
Seattle, Washington
September 26, 2012
PH2 1076319v1 10/03/12
Certification
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Exhibit 31.1
I, Bohn H. Crain, certify that:
1. I have reviewed this annual report on Form 10-K of Radiant Logistics, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light of the circumstances under which such statements were
made, not misleading with respect to the period covered by this annual report;
3. Based on my knowledge, the financial statements, and other financial information included in this annual
report, fairly present in all material respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this report;
4. As a certifying officer, I am responsible for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in
Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under my supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to me by others within those entities, particularly during the period in
which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this
report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the
period covered by this report based on such evaluation;
(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred
during the registrant's most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control
over financial reporting; and
5. I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of the registrant's board of directors:
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant
role in the registrant's internal control over financial reporting.
Date: September 26, 2012
By: /s/ Bohn H. Crain
Chief Executive Officer
PH2 1076319v1 10/03/12
Exhibit 31.2
Certification
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Todd E. Macomber, certify that:
1. I have reviewed this annual report on Form 10-K of Radiant Logistics, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light of the circumstances under which such statements were
made, not misleading with respect to the period covered by this annual report;
3. Based on my knowledge, the financial statements, and other financial information included in this annual
report, fairly present in all material respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this report;
4. As a certifying officer, I am responsible for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in
Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to
be designed under my supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to me by others within those entities, particularly during the period
in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this
report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the
period covered by this report based on such evaluation;
(d) Disclosed in this report any change in the registrant's internal control over financial reporting that
occurred during the registrant's most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal
control over financial reporting; and
5. I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of the registrant's board of directors:
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant
role in the registrant's internal control over financial reporting.
Date: September 26, 2012
By: /s/ Todd E. Macomber
Chief Financial Officer
PH2 1076319v1 10/03/12
Certifications Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
(18 U.S.C. Section 1350)
Exhibit 32.1
Pursuant to 18 U.S.C. Section 1350, each of the undersigned officers of Radiant Logistics, Inc. (the "Company")
hereby certifies that, to his knowledge, the Company's Annual Report on Form 10-K for the period ended June 30,
2012 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act
of 1934 and that the information contained in the Report fairly presents, in all material respects, the financial
condition and results of operations of the Company.
Date: September 26, 2012
By: /s/ Bohn H. Crain
Bohn H. Crain
Chief Executive Officer
By: /s/ Todd E. Macomber
Todd E. Macomber
Chief Financial Officer
PH2 1076319v1 10/03/12
Reconciliation of Non-GAAP Financial Measures
The table below is provided to reconcile certain financial disclosures in the Letter to Shareholders, page 1.
(Dollars in Thousands)
Year Ended June 30:
Net Income
Taxes
Depreciation and amortization
Net interest expense
EBITDA
Options expense
Tax Indemnity
Change in estimate of liabilities
Goodwill Impairment
Gain on Litigation Settlement
Business & Occupation Tax Refund
Gain on Extinguishment of debt
Change in contingent consideration
Expenses specifically attributable to acquisitions
Finder's fees
Amortization of bank fees
Loss (Gain) on litigation settlement
Adjusted EBITDA
Transition Costs
Litigation
Normalized EBITDA
2012
2011
2010
2009
2008
$
1,901
$
2,852
$
1,959
$
(9,730)
$
1,413
1,475
3,143
1,250
7,769
226
-
-
-
-
-
-
(900)
424
-
-
-
7,519
1,018
518
2,025
1,325
207
6,409
116
-
-
-
-
-
-
-
139
4
5
150
1,094
1,598
135
4,786
315
-
-
-
(355)
(364)
(135)
-
-
-
-
-
44
1,743
203
908
964
117
(7,740)
3,402
202
-
-
11,403
-
-
(190)
-
-
-
-
330
(487)
(1,431)
-
-
-
-
-
-
-
-
-
6,823
4,247
3,675
1,814
583
-
-
-
-
-
-
-
$
9,055
$
7,406
$
4,247
$
3,675
$
1,814
The Company provides measures of EBITDA (earnings before interest, income taxes, depreciation and amortization) and adjusted EBITDA to
exclude changes in contingent consideration, expenses specifically attributable to acquisitions, extraordinary items, costs related to share-based
compensation expense, and other non-cash charges as management believes these measures provide useful information to investors. Adjusted
EBITDA is also used by the Company’s creditors in assessing debt covenant compliance. Normalized EBITDA makes further adjustment for
additional costs that are not excluded for purposes of assessing debt covenant compliance but management believes are otherwise nonrecurring
in nature. These non-GAAP financial measures are presented solely to permit investors to more fully understand how management assesses the
performance of the Company. EBITDA is not intended as an alternative to cash flow provided by operating activities, as a measure of liquidity,
as an alternative to net income as an indicator of our operating performance, nor as an alternative to any other measure of performance in
conformity with accounting principles generally accepted in the United States of America.
.
CORPORATE HEADQUARTERS
405 114th Avenue SE, Third Floor
Bellevue, WA 98004
Tel: (800) 843-4784 or (425) 462-1094
www.radiantdelivers.com
ANNUAL MEETING
November 13, 2012
Corporate Headquarters
CORPORATE GOVERNANCE
Copies of the Company’s 2012 Annual Report
on From 10-K, Quarterly Reports on Form 10-Q
and Current Reports on Form 8-K to the
Securities and Exchange Commission, Proxy
Statement, and this Annual Report are available
online at http://financials.radiantdelivers.com or
to shareholders without charge upon written
request to the Secretary at the Company’s
principal address or by calling (800) 843-4784.
In addition, on the Company’s Corporate
Governance website at
http://governance.radiantdelivers.com,
PH2 1076319v1 10/03/12
shareholders can view the Company’s Corporate
Governance Principles, the Audit and Executive
Oversight Committee Charter and the
Company’s Code of Ethics. Copies of these
documents are available to shareholders without
charge upon written request to the Secretary at
the Company’s principal address.
The Company is required to file as an Exhibit to
its Form 10-K for each fiscal year certifications
under Section 302 of the Sarbanes-Oxley Act
signed by the Chief Executive Officer and the
Chief Financial Officer. In addition, the
Company is required to submit a certification
signed by the Chief Executive Officer to the
New York Stock Exchange within 30 days
following the Annual Meeting of Shareholders.
Copies of the certifications will be posted
promptly upon filing.
COMMON STOCK
Listed on New York Stock Exchange MKT
Symbol: RLGT
SHAREHOLDER RELATIONS CONTACT
Alesia Pinney
Secretary
(425) 462-1094
INVESTOR RELATIONS CONTACT
Carol Guzman
Director of Marketing & Communications
investors@radiantdelivers.com
(425) 462-1094, ext. 573
STOCK TRANSFER AGENT
Questions regarding stock holdings, certificate
placement/transfer and address changes should
be directed to:
Broadridge Corporate Issuer
Solutions, Inc.
1155 Long Island Avenue
Edgewood, NY 11717
(855) 418-5054
ONLINE ANNUAL REPORT
http://financials.radiantdelivers.com
To Our Shareholders:
This past year represented another year of notable progress for
Radiant highlighted by our 2012 up-listing to the NYSE Marketplace
and bell-ringing ceremony. Ringing the bell on the floor of the New
York Stock Exchange was a special milestone for the Company as it
gave us, not only the opportunity to pause and celebrate our success
to date, but also the opportunity to acknowledge our appreciation
for the support of our customers, operating partners, carriers,
shareholders and the hard-working employees that have come
together to make Radiant the great organization that it is today.
The key to our success rests in the nature of our scalable, non-asset
based business model and the compelling value proposition that
we bring to the marketplace. Our focus and commitment remains
on providing value to the agent-based forwarding community by:
leveraging our status as a public company to provide our partners
with an opportunity to share in the value that they help create;
providing a robust platform that translates into better purchasing
power with our vendors and more sophisticated technology solutions
for our customers; and offering a unique opportunity in terms of
succession planning and liquidity for our station owners. Many of
our station owners are also shareholders and we were proud to
represent them on the floor of the NYSE Exchange this summer.
Over this past year, we also made good progress on the integration
of Distribution By Air and completed two additional strategic
transactions; acquiring Isla International in Laredo, Texas (December
2011) in support of the expanding U.S-Mexico trade and acquiring
ALBS (February 2012) at New York/JFK to further strengthen our
international capabilities in the northeast.
Even without a full year’s benefit of our most recent acquisitions
in Laredo and New York/JFK, for our year ended June 30, 2012 we
continued our trend of profitable growth posting record results
with revenues of $297.0 million, an improvement of $93.2 million
or 45.7%; net revenues of $84.7 million, and improvement of
$22.2 million or 35.5%; and adjusted EBITDA of $9.2 million, an
improvement of $1.6 million or 22.3% over the comparable prior
year period.
We have certainly come a long way since our launch back in 2006
and yet we feel there is tremendous opportunity ahead. The
foundation has been laid – in people, process and technology - and
we are looking forward to continuing to build on this great platform
to bring value to our shareholders, our operating partners and the
end customers that we serve. Radiant Logistics – It’s the Network
that Delivers!®
Sincerely,
Bohn H. Crain
Founder, Chairman and CEO
Board of Directors, management and guests of Radiant Logistics, Inc. at the Opening Bell Ringing
Ceremony on the floor of the New York Stock Exchange on July 6, 2012.
O U R B R A N D S
Gross Revenue
(millions)
2008
2009
2010
2011
2012
300
200
100
0.0
297.0
203.8
137.0
146.7
100.2
Net Revenue
(millions)
2008
2009
2010
2011
2012
100
75
50
25
0.0
84.7
62.5
45.6
45.6
35.8
Adjusted EBITDA(1)
(millions)
2008
2009
2010
2011
2012
9.1(3)
7.4(2)
3.7
4.2
1.8
10
7.5
5.0
2.5
0.0
(1) Reflects a non-GAAP measure of income management considers useful in analyzing our
results. A reconciliation of our non-GAAP financial measures presented to our GAAP-based
net income, as well as a description of our non-GAAP measures, is included on the last
page of this Annual Report. Our non-GAAP measures are not intended to replace any
presentation included in our consolidated financial statements.
(2) Excludes $583,000 in non-recurring transition costs for acquisitions.
(3) Excludes $1,536,000 in non-recurring transition costs for acquisitions and other legal costs.
FOR MORE INFORMATION, PLEASE VISIT:
http://investor.radiantdelivers.com
It’s the Network that Delivers! ®
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