EX-99.2 4 c24819exv99w2.htm EX-99.2 exv99w2
Exhibit 99.2
UNAUDITED PRO FORMA COMBINED CONSOLIDATED FINANCIAL STATEMENTS
On August 31, 2011, Roadrunner Transportation Systems, Inc. (“RRTS”) acquired 100% of the outstanding stock of Prime Logistics Corporation (“Prime”) for $96.6 million, which includes transaction related costs of $0.5 million. Prime’s acquired assets and liabilities consist principally of accounts receivables, other current assets, property and equipment, accounts payables and accrued expenses. The merger of Prime was accounted for under the purchase method of accounting whereby the net tangible and intangible assets acquired and the liabilities assumed were recognized at their estimated fair values at the date of the merger. The allocation of purchase price is preliminary as management is in the process of assessing the fair value of these assets and liabilities, including the valuation of intangible assets. Management expects to finalize the allocation during the first half of 2012. Accordingly, there may be material adjustments to the allocation of the purchase price.
The total purchase price of Prime is summarized as follows (in thousands):
         
Cash paid for stock
  $ 93,590  
Value of RRTS common stock issued for Prime stock
    3,000  
 
     
Total purchase price
  $ 96,590  
 
     
The preliminary allocation of the purchase price paid to the fair value of the net assets acquired, including $0.5 million of transaction costs, is as follows (in thousands):
         
Accounts receivable
  $ 8,149  
Other current assets
    506  
Property and equipment
    3,996  
Goodwill
    95,307  
Customer relationships intangible asset
    3,400  
Other noncurrent assets
    523  
Accounts payable and other liabilities
    (15,291 )
 
     
Total purchase price
  $ 96,590  
 
     
Intangible assets include amounts recognized for customer relationships. Management believes the intangible assets acquired will provide future benefit ratably; accordingly, the amortizable intangible assets acquired will be amortized using the straight-line method over their respective useful lives. Because this valuation and management’s estimates are preliminary, the valuation of intangible assets and their useful lives may change. The excess of the purchase price over the net tangible and identifiable intangible assets was recorded as goodwill and amounted to approximately $95.3 million. In accordance with current accounting standards, goodwill will not be amortized and will be tested for impairment annually.
The following unaudited pro forma combined consolidated statements of operations have been prepared to assist in the analysis of the financial effects of the merger of Prime, and have been presented in accordance with accounting principles generally accepted in the United States of America. The unaudited pro forma combined consolidated statement of operations for the year ended December 31, 2010 combines the historical results for RRTS and Prime for the twelve months ended December 31, 2010 as if the merger had occurred on January 1, 2010. The unaudited pro forma combined consolidated statement of operations for the six months ended June 30, 2011 combines the historical results for RRTS and Prime for the six months ended June 30, 2011 as if the merger had occurred on January 1, 2010.

 

 


 

This pro forma financial information does not purport to represent what RRTS’ actual results of operations or financial position would have been had the merger occurred on the dates indicated nor is the information necessarily indicative of future operating results. The pro forma adjustments are based upon information and assumptions available at the time of the filing of the Form 8-K. This pro forma combined consolidated financial information should be read in conjunction with (i) the consolidated financial statements and related notes, “Selected Consolidated Financial and Operating Data,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” all of which appear in RRTS’ Annual Report on Form 10-K for the year ended December 31, 2010, and (ii) the unaudited consolidated financial statements and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” which appear in RRTS’ Quarterly Report on Form 10-Q for the quarter ended June 30, 2011.

 

 


 

ROADRUNNER TRANSPORTATION SYSTEMS, INC.
UNAUDITED PRO FORMA COMBINED CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 2011
(in thousands)
                                 
    Historical     Pro Forma     Pro Forma  
    RRTS     Prime     Adjustments     Consolidated  
ASSETS
                               
CURRENT ASSETS:
                               
Cash and cash equivalents
  $ 1,417     $ 3,176     $ (170 )(a)   $ 4,423  
Accounts receivable, net
    94,778       7,368       (100 )(b)     102,046  
Deferred income taxes
    6,367       300       (9 )(c)     6,658  
Prepaid expenses and other current assets
    13,308       205             13,513  
 
                       
Total current assets
    115,870       11,049       (279 )     126,640  
 
                       
 
                               
PROPERTY AND EQUIPMENT, NET
    19,997       4,085             24,082  
 
                               
OTHER ASSETS:
                               
Goodwill
    266,618       25,012       70,294 (d)     361,924  
Other noncurrent assets
    4,373       2,290       4,910 (e)     11,573  
 
                       
Total other assets
    270,991       27,302       75,204       373,497  
 
                       
 
                               
TOTAL ASSETS
  $ 406,858     $ 42,436     $ 74,925     $ 524,219  
 
                       
 
                               
LIABILITIES AND STOCKHOLDERS’ INVESTMENT
                               
CURRENT LIABILITIES:
                               
Current maturities of long-term debt
  $ 7,500     $ 1,665     $ 4,835 (f)   $ 14,000  
Accounts payable
    43,413       3,513             46,926  
Accrued expenses and other liabilities
    14,677       3,777       (859 )(g)     17,595  
 
                       
Total current liabilities
    65,590       8,955       3,976       78,521  
 
                               
LONG-TERM DEBT, net of current maturities
    36,500       10,303       84,268 (f)     131,071  
OTHER LONG-TERM LIABILITIES
    21,247       2,454       4,405 (h)     28,106  
PREFERRED STOCK SUBJECT TO MANDATORY REDEMPTION
    5,000                   5,000  
 
                       
Total liabilities
    128,337       21,712       92,649       242,698  
 
                       
 
                               
STOCKHOLDERS’ INVESTMENT:
                               
Common stock
    305       0       2 (i)     307  
Preferred stock
          13,656       (13,656 )(j)      
Additional paid-in capital
    263,085       6,617       2,998 (i)     266,083  
 
                    (6,617 )(j)        
Retained earnings
    15,131       4,489       (4,489 )(j)     15,131  
Treasury stock
          (4,039 )     4,039 (j)      
 
                       
Total stockholders’ investment
    278,521       20,724       (17,724 )     281,521  
 
                       
 
                               
TOTAL LIABILITIES AND STOCKHOLDERS’ INVESTMENT
  $ 406,858     $ 42,436     $ 74,925     $ 524,219  
 
                       
The accompanying notes are an integral part of the unaudited pro forma combined consolidated financial statements.

 

 


 

ROADRUNNER TRANSPORTATION SYSTEMS, INC.
UNAUDTIED PRO FORMA COMBINED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2011
(In thousands, except per share amounts)
                                 
    Historical     Pro Forma        
    RRTS     Prime     Adjustments     Pro Forma  
Revenues
  $ 379,429     $ 37,866     $     $ 417,295  
Operating expenses:
                               
Purchased transportation costs
    286,765       17,027             303,792  
Personnel and related benefits
    38,058       8,624       (880 )(k)     45,802  
Other operating expenses
    32,338       6,415       (150 )(l)     38,603  
Depreciation and amortization
    1,882       588       (10 )(m)     2,460  
Acquisition transaction expenses
    320       61       (61 )(n)     320  
 
                       
Total operating expenses
    359,363       32,715       (1,101 )     390,977  
 
                       
 
                               
Operating income
    20,066       5,151       1,101       26,318  
 
                               
Interest expense:
                               
Interest on long-term debt
    884       415       2,163 (o)     3,462  
Dividends on preferred stock subject to mandatory redemption
    100                   100  
 
                       
Total interest expense
    984       415       2,163       3,562  
 
                       
 
                               
Income (loss) before provision (benefit) for income taxes
    19,082       4,736       (1,062 )     22,756  
 
                               
Provision (benefit) for income taxes
    7,251       1,942       (546 )(p)     8,647  
 
                       
 
                               
Net income (loss) available to common stockholders
  $ 11,831     $ 2,794     $ (517 )   $ 14,108  
 
                       
 
                               
Earnings per share available to common stockholders:
                               
Basic
  $ 0.46                     $ 0.54  
 
                           
Diluted
  $ 0.44                     $ 0.52  
 
                           
 
                               
Weighted average common stock outstanding:
                               
Basic
    25,779               209 (q)     25,988  
 
                         
Diluted
    26,777               209 (q)     26,985  
 
                         
The accompanying notes are an integral part of the unaudited pro forma combined consolidated financial statements.

 

 


 

ROADRUNNER TRANSPORTATION SYSTEMS, INC.
UNAUDITED PRO FORMA COMBINED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2010
(In thousands, except per share amounts)
                                 
    Historical     Pro Forma        
    RRTS     Prime     Adjustments     Pro Forma  
 
                               
Revenues
  $ 632,018     $ 67,468     $     $ 699,486  
Operating expenses:
                               
Purchased transportation costs
    494,045       30,094             524,139  
Personnel and related benefits
    61,853       16,468       (1,330 )(k)     76,991  
Other operating expenses
    41,168       12,504       (300 )(l)     53,372  
Depreciation and amortization
    3,114       1,142       (21 )(m)     4,235  
Acquisition transaction expenses
    569       318       217 (n)     1,104  
IPO related expenses
    1,500                   1,500  
 
                       
Total operating expenses
    602,249       60,526       (1,434 )     661,341  
 
                       
 
                               
Operating income
    29,769       6,942       1,434       38,145  
 
                               
Interest expense:
                               
Interest on long-term debt
    7,954       1,027       4,129 (o)     13,110  
Dividends on preferred stock subject to mandatory redemption
    200                   200  
 
                       
Total interest expense
    8,154       1,027       4,129       13,310  
 
                       
 
                               
Loss on early extinguishment of debt
    15,916                   15,916  
 
                       
 
                               
Income (loss) before (benefit) provision for income taxes
    5,699       5,915       (2,695 )     8,919  
 
                               
Provision (benefit) for income taxes
    2,108       2,399       (1,175 )(p)     3,332  
 
                       
 
                               
Net income (loss)
    3,591       3,516       (1,520 )     5,587  
 
                               
Accretion of Series B preferred stock
    765                   765  
 
                       
 
                               
Net income (loss) available to common stockholders
  $ 2,826     $ 3,516     $ (1,520 )   $ 4,822  
 
                       
 
                               
Earnings (loss) per share available to common stockholders:
                               
Basic
  $ 0.11                     $ 0.19  
 
                           
Diluted
  $ 0.11                     $ 0.18  
 
                           
 
                               
Weighted average common stock outstanding:
                               
Basic
    25,779               209 (q)     25,988  
 
                         
Diluted
    26,777               209 (q)     26,985  
 
                         
The accompanying notes are an integral part of the unaudited pro forma combined consolidated financial statements.

 

 


 

ROADRUNNER TRANSPORTATION SYSTEMS, INC.
NOTES TO UNAUDITED PRO FORMA COMBINED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands)
1. Basis of Presentation
The accompanying unaudited pro forma combined consolidated financial statements present the pro forma results of operations and financial position for RRTS and Prime on a combined basis based on the historical financial information of each company and after giving effect to the Prime merger. The merger was recorded using the purchase method of accounting.
The unaudited pro forma combined consolidated statement of operations for the year ended December 31, 2010 combines the historical results for RRTS and Prime for the twelve months ended December 31, 2010 as if the merger had occurred on January 1, 2010. The unaudited pro forma combined consolidated statement of operations for the six months ended June 30, 2011 combines the historical results for RRTS and Prime for the six months ended June 30, 2011 as if the merger had occurred on January 1, 2010. The unaudited pro forma combined consolidated balance sheet as of June 30, 2011 gives effect to the merger of Prime as of such date.
2. Pro Forma Adjustments
The pro forma adjustments are based upon information and assumptions available at the time of the filing of the Form 8-K. The unaudited pro forma combined consolidated balance sheet includes adjustments that are factually supportable and directly attributable to the transaction regardless of whether they will have a continuing impact or were non-recurring. The unaudited pro forma combined consolidated statements of operations include adjustments which give effect to the events that are factually supportable, directly attributable to the transaction, and are expected to have a continuing impact on RRTS and Prime on a consolidated basis.
(a)   To reflect an adjustment to reduce cash for taxes paid on behalf of the sellers.
(b)   To reflect an increase in bad debt reserve.
(c)   To reflect a decrease in deferred tax assets due to a change in tax rate.
(d)   To eliminate historical goodwill and to record estimated goodwill resulting from the preliminary allocation of the purchase price to the fair value of net assets acquired.
(e)   To reflect (i) $3,696 of debt issue costs related to the amendment to RRTS’ credit facility to fund the merger, (ii) a $2,186 write-off of existing customer list intangibles and (iii) the preliminary allocation of $3,400 of purchase price to customer relationships with a useful life of 10 years. Management believes the intangible assets acquired will provide future benefit ratably; accordingly, the amortizable assets acquired will be amortized using the straight-line method over their useful life.
(f)   To reflect (i) payoff of existing Prime debt on the date of the merger and (ii) the current and long-term portions of the increase in RRTS’ credit facility to fund the merger.

 

 


 

(g)   To eliminate taxes payable not assumed in the acquisition.
(h)   To reflect (i) adjustment to deferred rent and to recognize an unfavorable lease obligation and (ii) adjustment to deferred taxes to account for purchase accounting adjustments and RRTS’ existing tax rate reset.
(i)   To reflect the issuance of 208,913 shares of RRTS common stock consisting of $2 par value and $2,998 of additional paid-in capital as part of the merger consideration.
(j)   To reflect the elimination of the stockholders’ investment accounts of Prime.
(k)   Reflects an adjustment to eliminate non-recurring expenses recorded by Prime as follows:
                 
    Year Ended     Six Months  
    December 31,     Ended  
    2010     June 30, 2011  
Shareholder value creation bonus
  $ 372     $ 401  
Plus: Non-recurring Mark R. Holden compensation
    958       479  
 
           
 
               
Pro forma adjustment
  $ 1,330     $ 880  
 
           
(l)   Reflects an adjustment to eliminate the historical management fee paid by Prime to Mark R. Holden, President and Chief Executive Officer of Prime. The management agreement between Prime and Mark R. Holden was terminated upon consummation of the Prime merger.
 
(m)   Reflects an increase in depreciation and amortization expense as a result of the Prime merger due to the preliminary Prime purchase price allocation which resulted in the amortization of Prime’s customer list intangible asset using the straight-line method over an estimated useful life of10 years, as follows:
                 
    Year Ended     Six Months  
    December 31,     Ended  
    2010     June 30, 2011  
Amortization of Prime’s customer relationships
  $ 340     $ 170  
Savings on Depreciation for useful lives changes
    (56 )     (48 )
Less: historical amount recorded for intangilbes
    (265 )     (132 )
 
           
 
               
Pro forma adjustment
  $ 21     $ (10 )
 
           
(n)   Reflects an adjustment to record one-time, non-recurring transaction expenses related to the merger with Prime for the year ended December 31, 2010 and to eliminate one-time, non-recurring transactionexpenses recorded by Prime during the year ended December 31, 2010 and the six months ended June 30, 2011.

 

 


 

(o)   The purchase price of the Prime merger was $97.5 million, consisting of $94.5 million in cash and $3.0 million in RRTS stock. This pro forma adjustment reflects an adjustment to record interest expense on the incremental debt of $94.5 million (less the application of Prime’s cash balance of $3.8 million), assuming the debt was issued under the RRTS credit facility at an interest rate of 4.82%, and as if the Prime merger had occurred on January 1, 2010, as follows:
                 
    Year Ended     Six Months  
    December 31,     Ended  
    2010     June 30, 2011  
Pro forma interest expense
  $ 4,419     $ 2,210  
Amortization of deferred financing cost
    737       369  
(Less): Historical amount recorded
    (1,027 )     (415 )
 
           
 
               
Pro forma adjustment
  $ 4,129     $ 2,163  
 
           
(p)   Reflects an adjustment to record income tax expense at the estimated statutory tax rate of 38%.
 
(q)   Reflects 208,913 shares of RRTS common stock issued as the stock component of the Prime merger consideration.