Business Context and Reporting Period
Company: Radiant Logistics, Inc.
Filing Type: Form 8-K (Current Report)
Date of Report: April 6, 2011
Event: Completion of the acquisition of DBA Distribution Services, Inc. ("DBA"), a privately-held New Jersey corporation operating under the trade name "Distribution by Air."
DBA provides domestic and international transportation and logistics services across North America through two company-owned logistics centers (Somerset, NJ; Los Angeles, CA) and 24 agency offices. Founded in 1981, DBA will operate as a wholly-owned subsidiary of Radiant Logistics following the merger.
Key Financial Metrics
Transaction Valuation: $12.0 million total consideration.
- Cash at Closing: $5.4 million (financed via existing funds and a Bank of America revolving credit facility).
- Seller Notes: $4.8 million payable over three years.
- Milestone Payments: $1.8 million contingent on integration milestones, payable within 180 days of achievement (no later than 18 months post-closing).
- Equity Option: Radiant may elect to satisfy up to $2.4 million of seller notes via common stock issuance within three months of closing.
DBA Historical Financials (Years Ended August 31):
| Metric | 2010 | 2009 |
|---|---|---|
| Net Revenue | $91,565,291 | $72,837,623 |
| Gross Profit | $11,717,299 | $10,981,307 |
| Operating Income (Loss) | $381,794 | $(497,293) |
| Net Income (Loss) | $255,887 | $(184,342) |
| Cash & Equivalents (End of Period) | $2,456,601 | $2,292,479 |
| Total Assets | $18,983,594 | $16,867,501 |
| Total Liabilities | $13,154,285 | $11,300,324 |
DBA Debt Obligations (as of Aug 31, 2010):
- Related party notes payable: $1,236,985 ($554,591 current; $682,394 long-term).
- Long-term debt: $71,930 ($11,112 current; $60,818 long-term).
- Capital lease obligation: $157,831 ($47,073 current; $110,758 long-term).
Material Changes vs. Prior Period
DBA Performance (2010 vs. 2009):
- Revenue Growth: Net revenue increased by approximately 25.7% ($18.7 million increase).
- Profitability: DBA turned an operating loss of $497,293 in 2009 into an operating profit of $381,794 in 2010. Net income improved from a loss of $184,342 to a profit of $255,887.
- Working Capital: Accounts receivable increased by $2.3 million, while accounts payable and accrued expenses increased by $1.9 million.
- Cash Flow: Net cash provided by operating activities increased from $275,944 in 2009 to $305,029 in 2010.
Guidance, Outlook, Risks, and Contingencies
Management Commentary & Outlook:
- Management expects to maintain DBA's operations consistent with past practices and to grow revenues and operating margins consistent with recent results.
- Anticipated synergies include the integration of DBA's operations with Radiant's existing logistics network.
- Key executives Paul Pollara (VP Operations - Western Region) and James Eagen (VP Operations - Eastern Region) have been retained under amended employment agreements.
Risks and Contingencies:
- Forward-Looking Statements: Actual results may differ due to discrepancies between unaudited and audited DBA results, reliance on DBA management, and customer retention risks.
- Integration Risk: Success depends on the ability to integrate operations and realize cost/revenue synergies.
- Legal: DBA is subject to various claims and legal proceedings in the normal course of business; management does not believe these will have a material effect.
- Debt Acceleration: Seller notes are subject to acceleration upon a "Corporate Transaction" (e.g., sale of DBA or Radiant).
Unusual Items:
- DBA recognized a $79,930 gain on foreign currency in 2010.
- Stock-based compensation expense was minimal ($6,245 in 2010).
Investor Verification Checklist
- Verify the final audited financial statements of DBA to confirm the $91.6 million revenue figure and $255,887 net income used in the acquisition valuation.
- Monitor the achievement of integration milestones to determine if the $1.8 million contingent payment will be triggered.
- Review the terms of the Bank of America revolving credit facility utilized to finance the cash portion of the deal.
- Assess the retention of key DBA personnel (Pollara and Eagen) and the stability of the 24 agency locations post-acquisition.
- Check for the filing of pro forma financial information, which is required to be filed by amendment within 71 days of this report.