Roadrunner Transportation Systems Inc. (OTC: RRTS) announced it has completely exited the truckload (TL) business. The unwinding includes divesting three TL units, including Rich Logistics, which was sold to an “undisclosed strategic buyer” and reefer unit, Roadrunner Temperature Controlled, which was purchased by Laurel Oak Capital Partners.
The Downer’s Grove, Illinois-based company’s Monday press release follows several actions recently undertaken to stem financial losses and refocus efforts to provide national less-than-truckload (LTL) service.
Former Celadon CEO and current head of STG Logistics Paul Svindland has joined the Roadrunner board. Svindland was brought on at Celadon in the aftermath of accounting and securities fraud at the company, which was a catalyst for its eventual bankruptcy filing at the end of 2019.
“With the actions announced today, we have completed our evolution from a troubled roll-up to a focused, national LTL carrier. We are eternally grateful to our team for the long hours and hard work through the prolonged period of transition,” said Roadrunner Executive Chairman Chris Jamroz.
In late-July, the transportation provider announced the spin-off of its logistics unit, Ascent Global Logistics, creating two separate companies.
In a separate press release issued Monday, Ascent announced its newly formed board of directors. Jamroz is also the executive chairman at Ascent.
Net cash position and new credit facility
Roadrunner reported that its credit facility with BMO Harris (NYSE: BMO) has been terminated. The company has entered into a new $45 million asset-based credit line with Crystal Financial. Roadrunner ended 2019 with $272 million in debt and finance leases, and $132 million in operating leases but recent divestitures as well as the spin-off of Ascent have reduced liabilities by $400 million, creating a net cash position.
Roadrunner is no longer subject to financial filing requirements with the U.S. Securities and Exchange Commission following its de-listing from the New York Stock Exchange (NYSE) in April.
“We enter this new stage of Roadrunner with the healthiest balance sheet in the company’s history,” said Roadrunner President Frank Hurst.
The corporate overhaul comes after failed attempts to integrate prior acquisitions, which were aimed to market the company as an “asset-right” and “asset-light” transportation and logistics provider. Efforts were further complicated by a major accounting scandal that required Roadrunner to restate financials for the periods of 2014 to 2016.
- Roadrunner unloads another unit, sells Stagecoach Cartage
- Roadrunner to sell Prime division to CHRW to help clean up balance sheet
- Roadrunner sells flatbed unit, another step in restructuring
- Roadrunner continues to restructure, sells intermodal unit to Universal Logistics
- Roadrunner downsizes dry van business, announces closures of five terminals, mass layoffs at five other locations
Roadrunner changed course in the fourth quarter of 2019 to a less capital-intensive structure focused on LTL. Investments relating to this restructuring left it running at an average monthly loss of $4 million.
However, Roadrunner reports that it has improved network service and transit times, which have led to a financial improvement. Despite COVID-induced “heavily depressed” volumes in March and April, growth returned in May, allowing the company to post its first “modest” earnings before interest, taxes, depreciation and amortization (EBITDA) growth in three years.
COVID headwinds led to “disruptions in pockets of our network” during June and July as rapid growth in e-commerce shipments have presented “facility and staffing constraints in a few markets,” according to Hurst.
“We plan to continue prioritizing service levels over profitability for the foreseeable future and will take advantage of our strong balance sheet to continuously redeploy profits generated into new technology, continuous lane enhancement and an improved driver and team member experience,” stated Hurst.
The company recently announced it was opening three new LTL service centers in Chicago, Philadelphia and Riverside, California, to address service issues. The Chicago facility will be open at the end of August.
“We are thrilled to be a standalone business and are grateful to our customers, business partners and team members who have stuck with us through our transformation. I am proud to say we have never been as strongly positioned for the future as we are today,” concluded Hurst.