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Item 5. Market for Registrant’s Common Equity

2020-09-28 compared with 2019-09-12 · 3 added, 274 removed, 15 unchanged (95% of the section changed)

2 unchanged sentences

Our common stock trades on the NYSE American under the symbol “RLGT.”

As of August 30, 2019, the number of stockholders of record of our common stock was 87.

As of September 1, 2020, the number of stockholders of record of our common stock was 85.

This figure does not include a greater number of beneficial holders of our common stock, whose shares are held of record by banks, brokers and other financial institutions.

5 unchanged sentences

Recent Issuance of Unregistered Securities

In January 2019, we issued 36,806 shares of common stock to Highways and Skyways, Inc.

in satisfaction of $0.2 million of earn-out payments for the period ended June 30, 2018.

In February 2020, the Company issued 45,086 shares of common stock at fair value in satisfaction of $0.3 million of consideration towards the acquisition of Friedway Enterprises, Inc.

and CIC2, Inc.

We did not utilize or engage a principal underwriter in connection with the above securities transactions.

3 unchanged sentences

Not applicable.

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.

We operate as a third-party logistics company, providing multi-modal transportation and logistics services primarily in the United States and Canada.

We service a large and diversified account base consisting of consumer goods, food and beverage, manufacturing and retail customers which we support from an extensive network of operating locations across North America as well as an integrated international service partner network located in other key markets around the globe.

We provide these services through a multi-brand network which includes over 100 locations operated exclusively on our behalf by independent agents, who we also refer to as our “strategic operating partners”, as well as approximately 20 Company-owned offices.

As a third-party logistics company, we have approximately 10,000 asset-based transportation companies, including motor carriers, railroads, airlines and ocean lines in our carrier network.

We believe shippers value our services because we are able to objectively arrange the most efficient and cost-effective means, type and provider of transportation service without undue influence caused by the ownership of transportation assets.

In addition, our minimal investment in physical assets affords us the opportunity for a higher return on invested capital and net cash flows than our asset-based competitors.

Through our operating locations across North America, we offer domestic and international air and ocean freight forwarding services and freight brokerage services including truckload services, LTL services, and intermodal services, which is the movement of freight in trailers or containers by combination of truck and rail.

Our primary business operations involve arranging the shipment, on behalf of our customers, of materials, products, equipment and other goods that are generally larger than shipments handled by integrated carriers of primarily small parcels, such as FedEx, DHL and UPS.

Our services include arranging and monitoring all aspects of material flow activity utilizing advanced information technology systems.

We also provide other value-added logistics services, including customs brokerage and MM&D solutions to complement our core transportation service offering.

We expect to grow our business organically and by completing acquisitions of other companies with complementary geographic and logistics service offerings.

Our organic growth strategy will continue to focus on strengthening existing and expanding new customer relationships leveraging the benefit of our truck brokerage and intermodal service offerings, while continuing our efforts on the organic build-out of our network of strategic operating partner locations.

In addition to our focus on organic growth, we continue to search for acquisition candidates that bring to our current platform a critical mass from a geographic and/or purchasing power standpoint along with complementary service offerings.

As we continue to grow and scale our business, we believe that we are creating density in our trade lanes which creates opportunities for us to more efficiently source and manage our transportation capacity.

In addition, we remain focused on leveraging our back-office infrastructure to drive productivity improvement across the organization.

Performance Metrics

Our principal source of income is derived from freight forwarding and freight brokerage services we provide to our customers.

As a third-party logistics provider, 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.

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.

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 acquisition 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 acquis itions.

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 certai n identifiable intangible assets based on the unique facts and circumstances of each acquisition.

As a result of our acquisition strategy, our net income will include material non-cash charges relating to the amortization of customer related intangible ass ets 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 earnin gs 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.

EBITDA is a non-GAAP measure of income and does not include the effects of preferred stock dividends, 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 technology and equipment, and all amortization charges (including amortization of leasehold improvements).

We then further adjust EBITDA to exclude changes in fair value of contingent consideration, expenses specifically attributable to acquisitions, transition and lease termination costs, foreign currency transaction gains and losses, extraordinary items, share-based compensation expense, litigation expenses unrelated to our core operations, MM&D start-up costs and other non-cash charges.

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.

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 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, fair value of contingent consideration, accounting for share-based compensation, the assessment of the recoverability of long-lived assets, goodwill, intangible assets, and the establishment of an allowance for doubtful accounts.

We perform an annual impairment test for goodwill as of April 1 of each year unless events or circumstances indicate impairment may have occurred before that time.

We assess qualitative factors to determine whether it is more-likely-than-not that the fair value of the reporting unit is less than the carrying amount.

After assessing qualitative factors, if further testing is necessary we would determine the fair value of each reporting unit, and compare the fair value to the reporting unit’s carrying amount.

Intangible assets consist of customer related intangible assets, trade names and trademarks, and non-compete agreements arising from our acquisitions.

Customer related intangible assets are amortized using the straight-line method over a period of up to 10 years, trademarks and trade names are amortized using the straight-line method over 15 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 generally own transportation assets.

We do, however, own certain trailers and refrigerated trailers that we use in our business.

We generate the majority of our air and ocean freight forwarding and f reight brokerage revenues by purchasing transportation services from direct (asset-based) carriers and reselling those services to our customers.

Freight forwarding revenues related to shipments where we issue a House Airway Bill or a House Ocean Bill of L ading are recognized over the transit period as customers’ goods move from origin to destination.

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.

All other revenue, including revenue from other value-added services including freight brokerage services, customs brokerage services and warehousing and fulfillment services, is recognized upon completion of the service.

Results of Operations

Fiscal year ended June 30, 2019, compared to fiscal year ended June 30, 2018

The following table summarizes transportation services revenue, cost of transportation and net transportation services revenue by geographic operating segments for the fiscal years ended June 30, 2019 and 2018 (in thousands):

Year Ended June 30, 2019

Year Ended June 30, 2018

United States

Transportation

Value-added services

Cost of transportation and other services

Transportation

Value-added services

Net revenues (1)

Transportation

Value-added services

Transportation

Value-added services

(1) Net revenues are revenues net of cost of transportation and other services.

Transportation revenue was $857.6 million and $817.7 million for the years ended June 30, 2019 and 2018 , respectively.

The increase of $39.9 million, or 4.9%, is primarily attributable to increased revenues from our industry vertical strategy.

Net transportation revenue was $213.5 million and $188.8 million for the years ended June 30, 2019 and 2018 , respectively.

Net transportation margins increased from 23.1% to 24.9%, primarily due to shifts in product mix.

Value added services revenue was $33.0 million and $24.8 million for the years ended June 30, 2019 and 2018 , respectively.

The increase of $8.2 million, or 32.9%, is primarily attributable to growth in our contract logistics and customer brokerage services offerings.

Net value added services revenue was $16.6 million for the year ended June 30, 2019, compared to $11.4 million for the comparable prior year period.

Net value added services revenue margins increased from 45.9% to 50.4%, primarily due to lower personnel costs as a percentage of revenue.

Effective July 1, 2018, we adopted ASC 606 using the modified retrospective method and began recognizing revenue from certain contracts with customers over time as services are rendered.

Periods prior to July 1, 2018, including the year ended June 30, 2018, are presented under the previous revenue recognition guidance, ASC 605, and have not been restated to conform to ASC 606.

Additionally, the Company made some reclassifications in the year ending June 30, 2018 to conform to the year ending June 30, 2019 reporting for comparability purposes.

The following table compares condensed consolidated statements of operations data by geographic operating segments for the fiscal years ended June 30, 2019 and 2018 (in thousands):

Year Ended June 30, 2019

Year Ended June 30, 2018

United States

Net revenues (1)

Operating expenses:

Operating partner commissions

Personnel costs

Selling, general and administrative expenses

Depreciation and amortization

Transition and lease termination costs

Change in fair value of contingent consideration

Total operating expenses

Income (loss) from operations

Other income (expense)

Income (loss) before income taxes

Income tax expense

Net income (loss)

net income attributable to non-

controlling interest

Net income (loss) attributable to Radiant Logistics, Inc.

preferred stock dividends

issuance costs for preferred stock redemption

Net income (loss) attributable to common stockholders

Year Ended June 30, 2019

Year Ended June 30, 2018

Operating expenses as a percent of

net revenue (1) :

United States

Operating partner commissions

Personnel costs

Selling, general and administrative

Depreciation and amortization

(1) Net revenues are revenues net of cost of transportation and other services.

Operating partner commissions increased $13.8 million, or 15.4%, to $102.6 million for the year ended June 30, 2019.

The increase is primarily due to increased net revenues from our industry vertical strategy.

As a percentage of net revenues, operating partner commissions increased 18 basis points to 44.6% from 44.4% for the years ended June 30, 2019 and 2018 , respectively.

Personnel costs increased $1.8 million, or 3.1%, to $60.4 million for the year ended June 30, 2019.

The increase is primarily due to new company owned locations opened during the previous fiscal year.

As a percentage of net revenues, personnel costs decreased 302 basis points to 26.2% from 29.3% for the years ended June 30, 2019 and 2018 , respectively.

Selling, general and administrative (“SG&A”) expenses increased $2.3 million, or 8.8%, to $28.5 million for the year ended June 30, 2019.

The increase is primarily attributable to increased technology spending, legal and bad debt expense for the period.

As a percentage of net revenues, SG&A decreased 70 basis points to 12.4% from 13.1% for the years ended June 30, 2019 and 2018 , respectively.

Depreciatio n and amortization costs increased $0.8 million, or 5.7%, to $15.2 million for the year ended June 30, 2019.

As a percentage of net revenues, depreciation and amortization decreased 58 basis points to 6.6% from 7.2% for the years ended June 30, 2019 and 20 18 , respectively.

The transition and lease termination cost was negative $11 thousand for an adjustment to the lease termination liability for the year ended June 30, 2019.

The comparable prior year period amount of $176 thousand represents lease termination costs associated with facility consolidation of the Company-owned location in New Jersey with the acquisition of DLT.

Change in fair value of contingent consideration was a gain of $1.2 million for the year ended June 30, 2019, compared to a gain of $1.2 million for the year ended June 30, 2018.

The change in each year is attributable to a change in management’s estimates of future earn-out payments through the remainder of the respective earn-out periods.

Other expenses decreased $0.1 million, or 5.1%, to $2.5 million for the year ended June 30, 2019.

The change is primarily due to the foreign currency transaction gain in the current period and the loss in the prior period.

Our change in net income is driven principally by increased net revenues, partially offset by increased operating expenses and increased income taxes compared to the prior year.

Our future financial results may be impacted by amortization of intangible assets resulting from acquisitions as well as gains or losses from changes in fair value of contingent consideration that are difficult to predict.

The following table provides a reconciliation for the fiscal years ended June 30, 2019 and 2018 of adjusted EBITDA to net income (loss), the most directly comparable GAAP measure (in thousands):

Year Ended June 30, 2019

Year Ended June 30, 2018

United States

Net income (loss) attributable to common stockholders

preferred stock dividends

issuance costs for preferred stock redemption

Net income (loss) attributable to Radiant Logistics, Inc.

Income tax expense

Depreciation and amortization

Net interest expense

Share-based compensation

Change in fair value of contingent consideration

Acquisition related costs

Litigation costs

Non-recurring costs

Transition and lease termination costs

MM&D Start-up costs

Foreign currency transaction loss (gain)

Adjusted EBITDA

Adjusted EBITDA as a % of net revenues (1)

(1) Net revenues are revenues net of cost of transportation and other services.

Liquidity and Capital Resources

Fiscal year ended June 30, 2019 compared to fiscal year ended June 30, 2018

Net cash provided by operating activities were $39.8 million and $4.8 million for the years ended June 30, 2019 and 2018, respectively.

The cash provided primarily consisted of net income adjusted for depreciation and amortization and changes in accounts payable and accounts receivable.

Compared to the prior fiscal year, cash provided by operating activities increased mainly due to increased collections from customers and decreased payments to suppliers.

Net cash used for investing activities were $6.2 million and $6.8 million for the years ended June 30, 2019 and 2018, respectively.

The primary uses of cash were for purchases of technology and equipment and for acquisitions.

Cash paid for acquisitions was $0.7 million for the year ended June 30, 2018.

Cash paid for purchases of technology and equipment was $6.4 million and $5.7 million for the years ended June 30, 2019 and 2018, respectively.

Net cash used for financing activities was $35.1 million and net cash provided was $1.4 million for the years ended June 30, 2019 and 2018, respectively.

Net repayments to the credit facility was $7.8 million and net proceeds from the credit facility was $7.9 million for the years ended June 30, 2019 and 2018, respectively.

Payment for the redemption of preferred stock was $21.0 million for the year ended June 30, 2019 .

The redemption was funded by a combination of cash on hand and the Senior Credit Facility.

The benefit of future reductions in payments of preferred stock dividends will be offset, by some extent, by the increase in debt service payments under the Senior Credit Facility.

Repayments of notes payable were $3.7 million and $3.4 million for the years ended June 30, 2019 and 2018, respectively.

Payments of contingent consideration were $0.2 million and $0.4 million for the years ended June 30, 2019 and 2018, respectively.

Payments of preferred stock dividends were $1.3 million and $2.0 million for the years ended June 30, 2019 and 2018, respectively.

Working Capital

Given our continued focus on the build-out of our network of operating partner 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.

We have not made any material acquisitions in the last two fiscal years.

A primary component of our business strategy is the continued development and implementation of advanced information systems to provide accurate and timely information to our management, strategic operating partners and customers.

During the year ended June 30, 2019, we spent approximately $2.2 million on enhancing our technology and software systems in order to increase our operating efficiency.

We intend to spend in excess of $3.5 million during the fiscal year ended June 30, 2020 in order to continue improving our technology systems, which we expect will include the implementation of a key transportation management system that will, among other things, more fully integrate our systems with our strategic operating partners and any new operations that we may acquire in the future.

Senior Credit Facility

We have the USD$75.0 million Senior Credit Facility with Bank of America, N.A., on its own behalf and as agent to the other lenders named therein, currently consisting of the Bank of Montreal (as the initial member of the syndicate under such loan).

The Senior Credit Facility matures on June 14, 2022 and is collateralized by a first-priority security interest in all of the assets of the U.S.

co-borrowers, a first-priority security interest in all of the accounts receivable and associated assets of the Canadian co-borrowers (the “Canadian A/R Assets”) and a second-priority security interest on the other assets of the Canadian borrowers.

Advances under the Senior Credit Facility are available to fund future acquisitions, capital expenditures, repurchase of Company stock, or for other corporate purposes.

Borrowings under the Senior Credit Facility accrue interest at a variable rate of interest based upon LIBOR and/or one or more other interest rate indices plus an applicable margin.

The Senior Credit Facility provides for advances of up to 85% of our eligible Canadian and domestic accounts receivable, 75% of eligible accrued but unbilled domestic receivables and eligible foreign accounts receivable, all of which are subject to certain sub-limits, reserves and reductions.

The co-borrowers of the Senior Credit Facility include the following:

(i) with respect to U.S.

obligations under the Senior Credit Facility, Radiant Logistics, Inc., Radiant Global Logistics, Inc., Radiant Transportation Services, Inc., Radiant Logistics Partners LLC, Adcom Express, Inc., Radiant Customs Services, Inc., DBA Distribution Services, Inc., International Freight Systems (of Oregon), Inc., Radiant Off-Shore Holdings LLC, Green Acquisition Company, Inc., On Time Express, Inc., Clipper Express Company, Radiant Global Logistics (CA), Service by Air, Inc., Highways and Skyways, Inc., and Radiant Trade Services, Inc.;

and (ii) with respect to Canadian obligations under the Senior Credit Facility, Wheels International Inc., 1371482 Ontario Inc., Wheels MSM Canada Inc.,

2062698 Ontario Inc., Associate Carriers Canada Inc.

and Wheels Associate Carriers Inc.

As co-borrowers under the Senior Credit Facility, the accounts receivable of the foregoing entities are eligible for inclusion within the overall borrowing base of the Company and all borrowers are responsible for repayment of the debt associated with applicable advances (U.S.

or Canadian) under the Senior Credit Facility.

In addition, we and our U.S.

subsidiaries guarantee both the U.S.

and Canadian obligations under t he Senior Credit Facility, while our Canadian subsidiaries guarantee only the Canadian obligations under the Senior Credit Facility.

The terms of the Senior Credit Facility are subject to a financial covenant which may limit the amount otherwise available under such facility.

The covenant requires us to maintain a basic fixed charge coverage ratio of at least 1.0 to 1.0 during any period (the “Trigger Period”) in which we are in default under the Senior Credit Facility if total availability falls below $10.0 million or if U.S.

availability is less than $6.0 million.

Under the terms of the Senior Credit Facility, we are permitted to make additional acquisitions without the consent of the senior lenders only if certain conditions are satisfied.

The conditions imposed by the Senior Credit Facility include the following:

(i) the absence of an event of default under the Senior Credit Facility, (ii) the acquisition must be consensual;

(iii) the company to be acquired must be in the transportation and logistics industry, located in the United States or certain other approved jurisdictions, and have a positive EBITDA for the 12 month period most recently ended prior to such acquisition, (iv) no debt or liens may be incurred, assumed or result from the acquisition, subject to limited exceptions, (v) after giving effect for the funding of the acquisition, we must have availability under the Senior Credit Facility of at least the greater of 15% of the U.S.-based borrowing base and Canadian-based borrowing base or $15.0 million, and U.S.

availability of at least $10.0 million, and (vi) the pro forma fixed charge coverage ratio is at least 1.1 to 1.0.

In the event that we are not able to satisfy the conditions of the Senior Credit Facility in connection with a proposed acquisition, we must either forego the acquisition, obtain the consent of the senior lenders, or retire the Senior Credit Facility.

This may limit or slow our ability to achieve the critical mass we may need to achieve our strategic objectives.

As of June 30, 2019, we have gross availability of $65.0 million, net of $13.8 million in advances and letter of credit reserves with approximately $51.3 million in availability under the Senior Credit Facility to support future acquisitions and our ongoing 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 Senior Credit 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.

Senior Secured Integrated Private Debt Fund IV LP Term Loan and Fund V Term Loan

On April 2, 2015, Wheels obtained a CAD$29.0 million senior secured Canadian term loan from IPD IV pursuant to the IPD IV Loan Agreement.

The Company and its U.S.

and Canadian subsidiaries are guarantors of the Wheels obligations thereunder.

The loan matures on April 1, 2024 and accrues interest at a rate of 6.65% per annum.

We made interest-only payments for the first 12 months and will make principal and interest through maturity.

In connection with the loan, we paid an amount equal to five months of interest payments into a debt service reserve account controlled by IPD.

In connection with our acquisition of Lomas, Wheels obtained a CAD$10.0 million senior secured Canadian term loan from IPD V pursuant to the IPD V Loan Agreement.

The Company and its U.S.

and Canadian subsidiaries are guarantors of the Wheels obligations thereunder.

The loan matures on June 1, 2024 and accrues interest at a rate of 6.65% per annum.

The loan repayment consists of monthly principal and interest payments.

The loans may be prepaid in whole at any time upon providing at least 30 days prior written notice and paying the difference between (i) the present value of the loan interest and the principal payments foregone discounted at the Government of Canada Bond Yield for the term from the date of prepayment to the maturity date, and (ii) the face value of the principal amount being prepaid.

The loans are collateralized by a (i) first-priority security interest in all of the assets of Wheels except the Canadian A/R Assets, (ii) a second-priority security interest in the Canadian A/R Assets, and (iii) a second-priority security interest on all of our assets.

The terms of the loan are subject to certain financial covenants, which require us to maintain (i) a fixed charge coverage ratio of 1.1 to 1.0 during any Trigger Period, (ii) a debt service coverage ratio of at least 1.2 to 1.0 and (iii) a senior debt to EBITDA ratio of at least 3.0 to 1.0.

Under the terms of the IPD Loan Agreements, we are permitted to make additional acquisitions without IPD’s consent only if certain conditions are satisfied, including, among others:

(i) the equity interests or property acquired in such acquisition constitute a business reasonably related to our business or the business of Wheels;

(ii) no default or event of default shall exist prior to or will be caused as a result of such acquisition;

(iii) we or Wheels shall have provided IPD with at least 10 business days prior written notice of such acquisition that must include certain descriptive information and pro forma information regarding the acquisition;

(iv) such person

whose equity interests or property are being acquired shall have, from the last da y of the most recent fiscal quarter of such person, actual (or pro forma to the extent approved in writing by IPD) positive EBITDA and net income, in each case for the 12 month period ending on such date;

(v) the aggregate cash consideration payable at the closing of the acquisition shall not exceed $10.0 million for any single transaction and $25.0 million in the aggregate, in any fiscal year or such greater amount approved in writing by IPD;

provided, however, that the foregoing limitation shall exclude c ash consideration derived from the proceeds of sales of newly issued equity interests of Radiant during the twelve-month period prior to the closing of such acquisition (as described below);

(vi) no debt or liens may be incurred, assumed or result from the acquisition, subject to limited exceptions;

(vii) the assets subject to the acquisition are free from all liens except those permitted under the IPD Loan Agreements;

(viii) the post-closing U.S.

availability under the Senior Credit Facility is at least $1 0.0 million on a pro forma basis and (ix) the pro forma fixed charge coverage ratio is at least 1.1 to 1.0.

Off Balance Sheet Arrangements

As of June 30, 2019, 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 Guidance

The recent accounting guidance is discussed in Note 2 of the “Notes to the Consolidated Financial Statements” contained elsewhere in this report.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 5. Market for Registrant’s Common Equity