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
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
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
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)
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. |