January 31, 2018

Roadrunner reports $360 million loss in 2016 as re-stated results come to light

Carrier posts $373.6 million non-cash impairment charge.

By DC Velocity Staff

After a year's delay, truckload, less-than-truckload (LTL), and logistics provider Roadrunner Transportation Systems Inc. today released its re-stated 2016 results. They weren't pretty.

The Cudahy, Wis.-based company, which has been under the gun since it announced last January that it would be forced to re-state results for the prior three years because of unrecorded expenses at two of its subsidiaries, reported a $360 million net loss in 2016. That was compared to revised 2015 results showing net income of $25.6 million. The company said it took a $373.6 million non-cash impairment charge in 2016 for re-valuing goodwill and other intangibles. The write-down reduced the company's earnings before interest, taxes, depreciation, and amortization (EBITDA) to $7.8 million, compared with a revised figure of $93.6 million in 2015.

Revenue for 2016 came in at $2.03 billion, up slightly from $1.99 billion in 2015, Roadrunner said. The company has until April 8 to disclose re-stated results for the remaining periods.

In a statement today, Roadrunner outlined a litany of problems that hurt profitability, among then higher operating expenses across multiple fronts, lower truck productivity due to weak demand and network inefficiencies, revenue declines in the LTL segment, and a negative product and service mix as a higher percentage of revenue. The company also spent more than expected to settle certain lease purchase programs, on litigation settlements, and on related legal costs.

The re-statement "is a difficult, but important, step forward" for Roadrunner, said CEO Curtis W. Stoelting, who was brought in last May as part of a wholesale executive-suite house cleaning that included a new president and CEO, CFO, and chief information officer.

Traders and investors responded to today's news by driving down the price of Roadrunner shares at midday to $5.99 a share, down $1.15 a share. The shares traded in August 2013 at more than $30 before starting a long slide that would accelerate dramatically starting in mid-2015, and would fall hard again in January 2017 after news of the re-statement.

The company said it plans to disclose results in March that will cover the first nine months of 2017, and file results shortly thereafter for the full year. It said it expects 2017 revenue to be roughly the same as in 2016, with adjusted EBITDA coming in below $30 million. Roadrunner said it was pressured last year by the same operating headwinds that it experienced in 2016.

Stronger demand and higher rates—trends that are widespread throughout trucking today—are benefitting the company so far in 2018, it said.

Roadrunner operates under an "asset-light" model where it effectively controls its truck capacity but doesn't employ drivers or own equipment. Roadrunner was one of the most acquisitive transport companies between 2005 and mid-2015, acquiring 34 companies over that span. During that time, it evolved from being exclusively an LTL carrier to becoming one whose truckload services would generate most of its revenue.

However, as economic and industry conditions worsened in 2016 for truckload and LTL carriers, Roadrunner's organizational structure, which at one time consisted of 20 operating units, became a costly and inefficient albatross. The company also admitted it was slow to respond to shifting market conditions.

Roadrunner has since restructured its 20 operating units into six operating groups. Four of those groups are in truckload, one in LTL and the sixth in Roadrunner's logistics group, which is known as Ascent Global Logistics.

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