CORRESP 1 filename1.htm corresp
(LOGO)
Brandon Lombardi
Tel. 602.445.8335
Fax. 602.445.8679
LombardiB@gtlaw.com
April 26, 2010
VIA FACSIMILE (202-772-9204)
Securities and Exchange Commission
Mail Stop 3561
Division of Corporation Finance
100 F Street, N.E.
Washington, DC 20549
Attention: Beverly Singleton
  Re:   Roadrunner Transportation Systems, Inc.
Amendment No. 5 to Registration Statement on Form S-1
File No. 333-152504
Filed on April 23, 2010
Dear Ms. Singleton:
     We express our appreciation for your continued assistance with the Registration Statement on Form S-1 of Roadrunner Transportation Systems, Inc. (the “Company”). On behalf of the Company, we are writing to respond to your request for supplemental support per our conversation on Monday, April 26, 2010 at approximately 12:30 p.m., Eastern time.
The Offering, page 6
     Pursuant to your request, the Company respectfully informs you that the number of shares of the Company’s common stock to be outstanding after the offering is calculated as set forth in the section entitled “Newly Issued Common Stock (Share Count)” on the attached Appendix I.
Summary Consolidated Financial and Other Data, page 7
     Pursuant to your request, the Company will revise the “Weighted average common stock outstanding” information to correct the transposition of numbers so that the information correctly states that the Company’s basic and diluted weighted average common stock outstanding is 15,109,830, as set forth on the attached Appendix II.
Use of Proceeds, page 18
     Pursuant to your request, the Company will revise the “Use of Proceeds” section of the prospectus and elsewhere as applicable to clarify that the prepayment penalty of approximately $10.6 million assumes an offering date of May 10, 2010, as set forth on Appendix II.


 


 

Securities and Exchange Commission
Attention: Beverly Singleton
April 26, 2010
Page 2
Capitalization, page 19
     Pursuant to your request, the Company has set forth on the attached Appendix I the calculation of ‘Total debt,’ ‘Newly issued common stock,’ ‘Additional paid-in capital,’ and ‘Retained deficit.’ In addition, the Company has included a proposed hand mark-up of the “Capitalization” table reflecting the appropriate changes to that section in the attached Appendix II.
Dilution, page 21
     Pursuant to your request, the Company has set forth on the attached Appendix I the calculation of the Company’s pro forma net tangible book deficit as of December 31, 2009.
* * * *
     Your continued prompt attention to the enclosed is greatly appreciated. If you have any questions regarding the Company’s responses, please do not hesitate to contact me at (602) 445-8335 or Bruce Macdonough of our office at (602) 445-8305.
Sincerely,
/s/ Brandon Lombardi
Brandon Lombardi
For the Firm
cc:   Mark DiBlasi

 


 

APPENDIX I
Dilution (as of 12/31/09)
($ in thousands, except per share values)
                                         
            Merger   As Adjusted   Offering   As Adj. for
    RRTS   Adjustments   for Merger   Adjustments   IPO/Merger
     
Net Tangible Book Value:
                                       
Total Assets
  $ 290,835     $ 39,851     $ 330,686     $ (2,260 )   $ 328,426  
Less: Goodwill
    210,834       33,837       244,671             244,671  
Less: Other intangibles
    630       424       1,054             1,054  
 
                                       
Less: Total Liabilities
  $ 171,894     $ 21,098     $ 192,992     $ (110,680 )   $ 82,312  
     
 
Net Tangible Book Value
  $ (92,523 )   $ (15,508 )   $ (108,031 )   $ 108,420     $ 389  
 
                                       
Pro forma common stock outstanding
    17,192,595       3,091,515       20,284,110       9,000,000       29,284,110  
 
                                       
Net tangible book value per share
    ($5.38 )   $ 0.06       ($5.33 )   $ 5.34     $ 0.01  
     
         
    Share Count
    (12/31/09)
Redeemable common stock
    259,806  
Series B convertible preferred stock
    2,082,766 (a)
Class A common stock
    14,567,521  
Class B common stock
    282,502  
 
       
Total
    17,192,595  
 
       
Note:
(a)   Includes the conversion of accrued and unpaid dividends as of December 31, 2009.
Newly Issued Common Stock (Share Count)
                 
            At Assumed
            Offering Date
    At 12/31/09   of 5/10/10
Series B convertible preferred stock
    2,082,766 (a)     2,195,307 (b)
Class A common stock
    14,567,521       14,567,521  
Class B common stock
    282,502       282,502  
Primary shares offered
    9,000,000       9,000,000  
 
               
Newly issued common stock’ as adjusted for the offering
    25,932,789 (c)     26,045,330 (c)
 
               
Plus: Exchange of GTS Shares
    3,091,515       3,230,324 (d)
 
               
‘Newly issued common stock’ as adjusted for the offering and GTS merger
    29,024,304 (c)     29,275,654 (c)
 
               
Plus: Redeemable common stock
            259,806  
 
               
Common stock to be outstanding after this offering (e)
            29,535,460  
 
               
Note:
(a)   Includes the conversion of accrued and unpaid dividends as of December 31, 2009.
 
(b)   112,541 shares of our common stock will be issued upon the conversion of dividends that accrue on our Series B preferred stock from December 31, 2009 through an assumed offering date of May 10, 2010.
 
(c)   Excludes 259,806 shares of redeemable common stock.
 
(d)   Includes 138,809 shares that are attributable to an acquisition-related increase in outstanding GTS shares subsequent to December 31, 2009.
 
(e)   As reflected on page 6 of the prospectus under ‘The Offering’.


 

APPENDIX I (CONT’D)
Total Debt
($ in thousands)
                                                                                         
            Offering Adjustments             Merger and New Credit Facility Adjustments              
                    Unaccreted     Prepayment                                             Refinancing of        
            Application of     Discount on     Penalty on                                             Existing Credit     As Adjusted  
            Primary     Junior     Junior                                             Facility with     for Offering  
    RRTS     Offering     Subordinated     Subordinated     As Adjusted     GTS     Use of RRTS     Transaction     Refinancing     New Credit     and GTS  
    Actual     Proceeds     Notes     Notes     for Offering     Actual     Restricted Cash     Fees     Fees     Facility     Merger  
Credit facility
  $ 70,160     $ (65,600 )   $ 2,958     $ 9,862     $ 17,380     $ 10,875     $ (4,066 )   $     $     $ (24,189 )   $  
Senior subordinated notes
    41,134       (41,134 )                                                      
Junior subordinated notes
    16,766       (16,766 )                                                      
New credit facility
                                              3,500       1,000       24,189       28,689  
 
                                                                 
Total Debt
  $ 128,060     $ (123,500 )   $ 2,958     $ 9,862     $ 17,380     $ 10,875     $ (4,066 )   $ 3,500     $ 1,000     $     $ 28,689  
Additional Paid-In Capital
($ in thousands)
                                                                 
            Offering Adjustments             Merger and New Credit Facility Adjustments        
            Application of     Value                                     As Adjusted  
            Primary     Adjustment of                     Exchange of             for Offering  
    RRTS     Offering     Redeemable     As Adjusted     GTS     GTS Shares for     Transaction     and GTS  
    Actual     Proceeds     Common Stock     for Offering     Actual     RRTS Shares     Fees     Merger  
Additional paid-in capital
  $ 103,698     $ 137,341     $ (2,157 )   $ 238,882     $ 22,135     $ (30 )   $ (3,500 )   $ 257,487  
Retained Earnings
($ in thousands)
                                                                 
            Offering Adjustments             Merger and New Credit Facility Adjustments        
                    Unaccreted     Prepayment                                
                    Discount on     Penalty on                             As Adjusted  
            Write-off of     Junior     Junior                     Write-off of     for Offering  
    RRTS     RRTS Debt     Subordinated     Subordinated     As Adjusted     GTS     GTS Debt     and GTS  
    Actual     Issue Costs     Notes     Notes     for Offering     Actual     Issue Costs     Merger  
Retained earnings (deficit)
  $ (597 )   $ (2,260 )   $ (2,958 )   $ (9,862 )   $ (15,677 )   $ 306     $ (189 )   $ (15,560 )

 


 

Appendix II
(See attached)

 


 

Summary Consolidated Financial and Other Data
 
The following table summarizes selected consolidated financial and other data as of and for the periods indicated. You should read the following information together with the more detailed information contained in “Capitalization,” “Selected Consolidated Financial and Other Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and the consolidated financial statements and the related notes included elsewhere in this prospectus.
 
The consolidated statement of operations data for the years ended December 31, 2007, 2008, and 2009 and the consolidated balance sheet data as of December 31, 2009 are derived from our audited consolidated financial statements included in this prospectus.
 
                         
(In thousands, except share and per share data)   Years Ended December 31,  
    2007     2008     2009  
 
Consolidated Statement of Operations Data
                       
Revenues
  $ 538,007     $ 537,378     $ 450,351  
Operating income
    17,934       7,280       13,202  
Net income (loss)
    935       (3,834 )     167  
Net income (loss) available to common stockholders
    935       (3,834 )     (1,783 )
                         
Weighted average common stock outstanding:
                       
Basic
    15,113,563       15,112,667       15,109,830  
Diluted
    15,133,571       15,112,667       15,109,830  
                         
                         
Earnings (loss) per share available to common stockholders
                       
Basic
  $ 0.06     $ (0.25 )   $ (0.12 )
Diluted
  $ 0.06     $ (0.25 )   $ (0.12 )
                         
                         
Pro forma diluted earnings per share(a)
                  $ 0.01  
                         
Pro forma diluted earnings per share (as adjusted)(b)
                  $ 0.26  
                         
Other Data
                       
Working capital (end of period)
  $ 15,539     $ 13,467     $ 19,453  
Capital expenditures
    1,867       1,098       2,246  
Capital expenditures as a percentage of revenues(c)
    0.3 %     0.2 %     0.5 %
 
                 
    As of December 31, 2009  
(In thousands)
  Actual     As Adjusted(d)  
 
Consolidated Balance Sheet Data
               
Cash
  $ 667     $ 667  
Total current assets
    63,765       63,765  
Property and equipment, net
    5,292       5,292  
Total assets
    290,835       288,575 (e)
Total current liabilities
    44,312       36,912  
Current maturities of long-term debt
    7,400        
Total debt (including current maturities)
    128,060 (f)     17,380  
Series A preferred stock subject to mandatory redemption
    5,000       5,000  
Redeemable common stock
    1,740       3,897 (g)
Total stockholder’s investment
    117,201       223,464 (h)
 
 
(a) Pro forma diluted earnings per share is computed by dividing net income by the pro forma number of weighted average shares outstanding used in the calculation of diluted earnings per share, but after assuming conversion of our Series B preferred stock (including accrued but unpaid dividends) into shares of our common stock and the exercise of any dilutive stock options and warrants.
 
(b) Pro forma diluted earnings per share (as adjusted) is computed by dividing net income, adjusted for the elimination of approximately $10.7 million in interest expense and the related tax benefit of approximately $4.1 million, assuming the retirement of approximately $123.5 million of our outstanding debt (including accrued interest and prepayment penalties), by the pro forma number of weighted average shares outstanding used in the calculation of diluted earnings per share, but after assuming conversion of our Series B preferred stock (including accrued but unpaid dividends) into shares of our common stock, the exercise of any dilutive stock options and warrants, and the issuance of shares in this offering (all of the proceeds of which issuance will be used to retire our outstanding indebtedness).
 
(c) Our management uses capital expenditures as a percentage of revenues to evaluate our operating performance and measure the effectiveness of our non-asset based structure. We believe this financial measure is useful in evaluating the efficiency of our operating model compared to other companies in our industry.
 
(d) The as adjusted column is unaudited and gives effect to:
 
  n   The conversion of all outstanding shares of our Series B preferred stock (including accrued but unpaid dividends) into shares of our common stock on a 149.314-for-one basis upon the completion of this offering; and


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Use of Proceeds
 
Assuming an initial public offering price of $15.00 per share, which is the midpoint of the range indicated on the cover of this prospectus, we estimate that we will receive net proceeds of $123.5 million after deducting underwriting discounts and commissions and estimated offering expenses payable by us. A $1.00 increase (decrease) in the assumed initial public offering price of $15.00 per share would increase (decrease) the net proceeds to us from this offering by approximately $8.4 million, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same, and after deducting underwriting discounts and estimated offering expenses payable by us.
 
We intend to use all of the net proceeds of this offering to prepay approximately $49.6 million of the outstanding debt under our credit facility, approximately $42.2 million to retire our senior subordinated notes and accrued interest, and approximately $31.7 million to retire our junior subordinated notes, including prepayment penalties and accrued interest. In addition, we intend to use approximately $33.7 million of borrowings under an anticipated new credit facility, which we anticipate entering into in connection with the consummation of this offering, together with approximately $4.1 million of restricted cash, to retire the approximately $21.4 million remaining balance of existing indebtedness and an aggregate of approximately $11.9 million of outstanding debt under GTS’ credit facility, to pay approximately $1.0 million of refinancing fees, and to pay an aggregate of $3.5 million of transaction fees to terminate management and consulting agreements with certain affiliates concurrent with this offering. See “Certain Relationships and Related Transactions.”
 
Our current credit facility includes a $50.0 million revolving credit facility, a $40.0 million term note, and a $9.0 million incremental term loan. Our credit facility matures in 2012. Availability under the revolving credit facility is subject to a borrowing base of eligible accounts receivable, as defined in the credit agreement. Interest is payable quarterly at LIBOR plus an applicable margin or, at our option, prime plus an applicable margin. At December 31, 2009, the weighted average interest rate on our credit facility was 5.4%. Principal is payable in quarterly installments ranging from $1.9 million per quarter in 2010 increasing to $2.4 million per quarter through December 31, 2011. A final payment of the outstanding principal balance is due in 2012. The revolving credit facility also provides for the issuance of up to $6.0 million in letters of credit. As of December 31, 2009, we had outstanding letters of credit totaling approximately $4.4 million. As of December 31, 2009, approximately $34.5 million was outstanding under the term loans and $35.7 million was outstanding under the revolving credit facility.
 
Our senior subordinated notes were issued in an aggregate principal amount at maturity of approximately $36.4 million and will mature on August 31, 2012. Each senior subordinated note includes cash interest of 12% plus a deferred margin, payable quarterly, that is treated as deferred interest and is added to the principal balance of the note each quarter. The deferred interest ranges from 3.5% to 7.5% depending on our total leverage calculation, payable at maturity in 2012. As of December 31, 2009, there was $41.1 million in aggregate principal amount of senior subordinated notes outstanding.
 
Our junior subordinated notes were issued in an aggregate face amount of $19.5 million and will mature February 28, 2013. Our junior subordinated notes include interest of 20% accrued quarterly that is deferred and is added to the principal balance of the note each quarter and is payable at maturity on February 28, 2013. In addition, the junior subordinated notes agreement requires us to pay a premium upon repayment of the junior subordinated notes. The applicable premium is based on the timing of the repayment and begins at 50% of the aggregate principal amount and decreases to 10% over the life of the note. Assuming an offering date of May 10, 2010, we anticipate the prepayment penalty will be approximately $10.6 million and that accrued and unpaid interest will total approximately $1.6 million. As of December 31, 2009, there was $16.8 million in aggregate principal amount of junior subordinated notes outstanding, net of an unaccreted discount of $3.0 million.
 
GTS’ credit facility consists of a term loan facility of $10.3 million, of which approximately $9.9 million was outstanding as of December 31, 2009, and a five-year revolving credit facility of up to $4.0 million, of which approximately $1.0 million was outstanding as of December 31, 2009. As of December 31, 2009, the weighted average interest rate on GTS’ credit facility was 4.1%.
 
We will not receive any of the net proceeds from the sale of shares of common stock by the selling stockholders, which are estimated to be approximately $22.3 million. See “Principal and Selling Stockholders.”
 
Dividend Policy
 
Historically, we have not paid dividends on our common stock, and we currently do not intend to pay any dividends on our common stock after the completion of this offering. We currently plan to retain any earnings to finance the growth of our business rather than to pay cash dividends. Payments of any cash dividends in the future will depend on our financial condition, results of operations, and capital requirements as well as other factors deemed relevant by our board of directors. Our current debt agreements prohibit us from paying dividends without the consent of our lenders.


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Capitalization
 
The following table sets forth our capitalization as of December 31, 2009:
 
  n   on an actual basis, taking into account the 149.314-for-one conversion (in the form of a stock split) of all of our outstanding shares of Class A common stock, Class B common stock, and Series B preferred stock (including accrued but unpaid dividends);
 
  n   as adjusted to reflect the sale of 9,000,000 shares of common stock offered by us at an assumed public offering price of $15.00 per share, which is the midpoint of the range indicated on the cover of this prospectus, the deduction of underwriting discounts and estimated offering expenses, the application of the net proceeds we will receive from the offering in the manner described in “Use of Proceeds;” and the conversion of our Class A common stock, Class B common stock and Series B preferred stock into a single class of newly authorized common stock; and
 
  n   as further adjusted to reflect the GTS merger that will occur simultaneous with the consummation of this offering.
 
See “Prospectus Summary — The Offering” for information relating to the expected number of shares to be outstanding after this offering, which assumes an offering date of May 10, 2010 and reflects (i) an additional 138,809 shares that are attributable to an acquisition-related increase in outstanding GTS shares subsequent to December 31, 2009, and (ii) an additional 112,541 shares that are attributable to the offering-related conversion of dividends that accrue on our Series B preferred stock subsequent to December 31, 2009.
 
                         
    As of December 31, 2009  
          As Adjusted for  
(In thousands, except share data)               Offering and
 
    Actual     Offering     GTS Merger(a)  
 
Cash and cash equivalents
  $ 667     $ 667     $ 2,176 (b)
                         
Restricted cash
  $ 4,066 (c)   $ 4,066     $  
                         
                         
Debt:
                       
Credit facility
  $ 70,160     $ 17,380     $  
Senior subordinated notes
    41,134              
Junior subordinated notes
    16,766 (d)            
New credit facility
                  28,689 (e)
                         
Total debt
    128,060       17,380       28,689 (e)
                         
                         
Series A preferred stock subject to mandatory redemption, $.01 par value; 5,000 shares authorized; 5,000 shares issued and outstanding, actual and as adjusted
    5,000       5,000       5,000  
                         
Redeemable common stock(f):
                       
Class A common stock, $.01 par value; 259,806 shares issued and outstanding, actual; no shares issued and outstanding, as adjusted
    1,740              
                         
Newly issued common stock, $.01 par value; no shares issued and outstanding, actual; 259,806 shares issued and outstanding, as adjusted
          3,897       3,897  
                         
Stockholders’ investment(g):
                       
Series B convertible preferred stock, $.01 par value; 1,791,768 shares issued and outstanding, actual; no shares issued and outstanding, as adjusted(h)
    13,950              
Class A common stock, $.01 par value; 14,567,521 shares issued and outstanding, actual; no shares issued and outstanding, as adjusted
    147              
Class B common stock, $.01 par value; 298,628 shares authorized; 282,502 shares issued and outstanding, actual; no shares issued and outstanding, as adjusted
    3              
Newly issued common stock, $.01 par value; 100,000,000 shares authorized; no shares issued and outstanding, actual; 25,932,789 shares issued and outstanding, as adjusted for the offering; 29,024,304 shares issued and outstanding, as adjusted for the offering and GTS merger
          259       290 (i)
Additional paid-in capital
    103,698       238,882 (j)     257,487 (k)
Retained deficit
    (597 )     (15,677 )(l)     (15,560 )(m)
                         
Total stockholders’ investment
    117,201       223,464       242,217  
                         
Total capitalization
  $ 252,001     $ 249,741     $ 279,803  
                         
 
(a) The GTS merger is conditioned upon the completion of this offering.
 
(b) Reflects the addition of $1.5 million of cash and cash equivalents held by GTS as of December 31, 2009.
 
(c) See Note 1 of the notes to our consolidated financial statements included elsewhere in this prospectus. We intend to use this restricted cash, which is reflected in other noncurrent assets in our consolidated balance sheet, together with borrowings under our anticipated new credit facility, to pay $3.5 million of transaction fees, to pay approximately $1.0 million of refinancing fees, and to retire the remaining balance of our outstanding debt and all of GTS’ outstanding debt.


19