Roadrunner Transportation Systems Inc. (RRTS)

[Enterprising Investor]

Roadrunner Transportation Systems Reports Fourth Quarter and Full Year 2018 Operating Results (3/12/19)

- Revenue growth in full year 2018

- Adjusted EBITDA improvement in Q4 and full year 2018

- Continued progress on both operational and capital structure improvements

- Positive financial outlook for 2019 and beyond

DOWNERS GROVE, Ill.--(BUSINESS WIRE)--Roadrunner Transportation Systems, Inc. (“Roadrunner” or the “company”) (NYSE: RRTS), a leading asset-right transportation and asset-light logistics service provider, today announced results for the fourth quarter and year ended December 31, 2018 and the filing of its Annual Report on Form 10-K.

Fourth Quarter Results

Revenues for the fourth quarter ended December 31, 2018 were $551.5 million, a 1.6% decrease from revenues of $560.4 million for the fourth quarter ended December 31, 2017. Higher revenues in the Ascent Global Logistics (“Ascent”) segment were offset by declines in the Truckload & Express Services (“TES”) and Less-Than-Truckload (“LTL”) segments.
Revenue declines in TES resulted primarily from lower air and ground expedite brokerage at Active On-Demand compared to peak levels in the prior quarter, partially offset by revenue growth in over-the-road and intermodal services.

Revenue declines in LTL were a result of planned reductions in service areas and pricing discipline to drive more shipments into higher density lanes; lower shipment counts were partially offset by higher rates and average shipment size which yielded an increase in revenue per shipment.
Ascent revenues grew by 12.6% benefiting from growth in all three service offerings. International freight forwarding drove higher percentage growth due to higher rates and volumes, including some acceleration of shipments in anticipation of potential future tariff impacts.

Operating loss in the fourth quarter of 2018 was $22.9 million, which included corporate restructuring and restatement costs of $6.7 million, non-cash fleet impairment charges in intermodal services of $1.6 million and a contingent purchase obligation adjustment of $1.8 million. Operating loss in the fourth quarter of 2017 was $22.3 million, which included corporate restructuring and restatement costs of $8.7 million and legal reserves of $5.7 million.

Net loss increased to $58.4 million in the fourth quarter of 2018 compared to $23.3 million in the fourth quarter of 2017. The increase was due primarily to the items affecting operating loss discussed above and increased interest costs of $18.1 million related to the company’s preferred stock.

Diluted loss per share available to common stockholders was $1.52 for the fourth quarter of 2018, compared to diluted loss per share of $0.61 for the fourth quarter of 2017.

Adjusted EBITDA for the fourth quarter of 2018 improved by $6.0 million to $2.9 million compared to a loss of $3.1 million for the fourth quarter of 2017. The improvement was due to higher Adjusted EBITDA in the LTL and Ascent segments and lower corporate costs in 2018. However, these improvements were partially offset by lower Adjusted EBITDA at TES which was negatively impacted by weak performance in dry van as well as softening trends in air and ground expedite, which offset improved performance in temperature controlled and flatbed.

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Full Year Results

Revenues for the year ended December 31, 2018 were $2,216.1 million. Revenues for the year ended December 31, 2017 were $2,091.3 million, including $67.6 million of revenues from Unitrans which was divested in September of 2017. Excluding Unitrans, revenues grew 9.5%. Higher revenues in the TES and Ascent segments contributed to the increase, which were partially offset by lower revenue in the LTL segment.
Revenue increases of 13.2% in TES resulted primarily from higher rates across all businesses and strong volume increases in air and ground expedite at Active On-Demand.

Revenue declines in LTL were a result of planned reductions in service areas and pricing discipline to drive more shipments into higher density lanes; lower shipment counts were partially offset by higher rates and average shipment size which yielded an increase in revenue per shipment.
Ascent revenues, excluding Unitrans, grew by 14.0% benefitting from growth in all three service offerings; retail consolidation drove higher percentage growth due to new customer starts and increased volumes and rates from existing customers.

Operating loss for the year ended December 31, 2018 was $58.5 million, which included corporate restructuring and restatement costs of $22.2 million, operations restructuring costs of $4.7 million, a contingent purchase obligation of $1.8 million and non-cash fleet impairment charges in intermodal services of $1.6 million. The operating loss for the year ended December 31, 2017 was $36.5 million, which included:
A gain on the sale of Unitrans of $35.4 million;
Corporate restructuring and restatement costs of $32.3 million;
Non-cash impairment charges of $4.4 million related to the revaluation of the Ascent segment goodwill after the sale of Unitrans;
Unitrans operating income of $5.8 million; and
Legal reserves of $5.7 million.

Net loss increased to $165.6 million for the year ended December 31, 2018, compared to $91.2 million for the year ended December 31, 2017, due primarily to the items affecting operating loss discussed above, increased interest costs of $56.0 million related to the company’s preferred stock and a lower federal tax rate. These increases were partially offset by lower bank debt interest costs and the absence of a loss from debt extinguishment of $15.9 million that occurred in 2017.
Diluted loss per share available to common stockholders was $4.30 for the year ended December 31, 2018, compared to diluted loss per share of $2.37 for the year ended December 31, 2017.

Adjusted EBITDA improved by $18.8 million to $17.3 million for the year ended December 31, 2018 compared to an Adjusted EBITDA loss, excluding the impact of Unitrans, of $1.6 million for the year ended December 31, 2017. The improvement was due to higher Adjusted EBITDA in the TES and Ascent segments and lower corporate costs in 2018, partially offset by lower Adjusted EBITDA at LTL.

Rights Offering, Debt Refinancing and Increased Liquidity

On February 26, 2019, the company completed the previously announced fully backstopped $450 million rights offering. The net proceeds from the rights offering and backstop commitment were used to fully redeem the outstanding shares of the company’s preferred stock, to pay related accrued and unpaid dividends and to add over $30 million of cash for working capital and general corporate purposes.

On February 28, 2019, the company refinanced its asset-based lending (“ABL”) facility. The new ABL facility consists of a $200.0 million asset-based revolving line of credit. Also on February 28, 2019, the company entered into a new term loan credit agreement (“Term Loan”). The Term Loan proceeds of $51.1 million were used to repay in full the previous term loan and provide cash for general corporate purposes.
After completing the rights offering and the debt refinancing, the company has increased funds available for working capital, operating activities and equipment procurement purposes. The new ABL and Term Loan facilities mature on February 28, 2024.

CEO Comments

“Overall we made good progress in 2018 on a number of fronts. Operationally, over two-thirds of our businesses are now stable and growing. Ascent Global Logistics and Active On-Demand have led the way followed by our temperature controlled, intermodal services and flatbed businesses, all of which achieved improved stability 2018 and are positioned for growth in 2019,” said Curt Stoelting, Chief Executive Officer of Roadrunner.

Stoelting continued, “We are disappointed in the short-term performance of our dry van truckload fleets and are actively developing plans to streamline these businesses. Lastly, we continue to make steady progress and improvements in our LTL segment where we reduced our operating losses in the fourth quarter versus the prior year quarter and continued to see operational benefits from eliminating selected service areas, improving our freight and lane mix and lowering our operating costs. We believe improving our dry van businesses and LTL segment will add significant value to Roadrunner.”

“With the recent completion of the rights offering and debt refinancing, we now have the capital structure to fully support our long-term business plans which we believe will increase the speed and likelihood of a full operational recovery followed by additional growth and optimization opportunities,” Stoelting added.

Financial Outlook

The company has longer-term business goals to deliver higher levels of profitability and sustainable returns on invested capital. The company expects to increase its Adjusted EBITDA in 2019 with improvements in all three segments. Over the longer-term, the company expects that segment margins will increase to be in-line with peer group margins and that the structural changes currently being implemented will result in profitability that is more resilient and better positions Roadrunner for success throughout natural industry cycles.

Conference Call and Webcast

Roadrunner management will host a conference call to discuss the company’s results for the year ended December 31, 2018 on Tuesday, March 12, 2019 at 10:00 a.m. Eastern Time. To access the conference call, please dial 866-763-0340 (U.S.) or 703-871-3799 (International) approximately 10 minutes prior to the start of the call. Callers will be prompted for passcode 5995447. Presentation materials and a live webcast of the call can be accessed on the “events and presentations” page in the Investor Relations section of Roadrunner's website, www.rrts.com. The conference call may include forward-looking statements.

If you are unable to listen to the live call, a replay will be available through Tuesday, March 19, 2019 and can be accessed by dialing 855-859-2056 (U.S.) or 404-537-3406 (International). Callers will be prompted for passcode 5995447. An archived version of the webcast will also be available for a period of time under the Investor Relations section of Roadrunner's website, www.rrts.com.

About Roadrunner Transportation Systems, Inc.

Roadrunner Transportation Systems is a leading asset-right transportation and asset-light logistics service provider offering a full suite of solutions under the Roadrunner®, Active On-Demand® and Ascent Global Logistics® brands. The Roadrunner brand offers less-than-truckload, temperature controlled and intermodal services. Active On-Demand offers premium mission critical air and ground transportation solutions. Ascent Global Logistics offers domestic freight management, retail consolidation, international freight forwarding and customs brokerage. For more information, please visit Roadrunner’s websites, www.rrts.com and www.ascentgl.com.

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