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Roadrunner Transportation Systems Reports Third Quarter 2014 Results and Announces Fourth Quarter 2014 Guidance

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Roadrunner Transportation Systems, Inc. (NYSE:RRTS) , a leading asset-light transportation and logistics service provider, today reported financial results for the three and nine months ended September 30, 2014.

Third quarter 2014 diluted income per share available to common stockholders was $0.40 before acquisition transaction expenses of $1.9 million compared with $0.36 in the prior year quarter before acquisition transaction expenses of $0.6 million.

Revenues for the quarter ended September 30, 2014 increased 37.2% to $498.1 million from $363.2 million for the quarter ended September 30, 2013. Third quarter 2014 net income available to common stockholders was $14.4 million compared with $13.2 million in the prior year quarter. Third quarter 2014 diluted income per share available to common stockholders was $0.37 compared with $0.35 in the prior year quarter.

Roadrunner’s summary financial results for the three and nine months ended September 30 are highlighted below.

Three Months Ended Nine Months Ended
(In thousands, except per share data) September 30, September 30,
2014 2013 2014 2013
Revenues $ 498,086 $ 363,156 $ 1,340,298 $ 994,444
Purchased transportation cost $ 347,247 $ 253,158 $ 926,600 $ 687,422
Depreciation and amortization 6,319 4,029 16,788 11,230
Other operating expenses 117,314 81,749 323,133 227,747
Acquisition transaction expenses 1,926 561 2,305 851
Operating income $ 25,280 $ 23,659 $ 71,472 $ 67,194
Net income available to common stockholders 14,413 13,230 39,595 37,782
Weighted average diluted shares outstanding 39,380 38,191 39,268 37,469
Diluted income per share available to common stockholders $ 0.37 $ 0.35 $ 1.01 $ 1.01

Roadrunner’s earnings before interest, taxes, depreciation, and amortization (“EBITDA”), a non-GAAP financial measure, of $31.6 million for the quarter ended September 30, 2014 represented an increase of 14.1% from EBITDA of $27.7 million for the quarter ended September 30, 2013. EBITDA before $1.9 million of acquisition transaction expenses was $33.5 million in the third quarter of 2014 which was an increase of 18.7% over EBITDA before $0.6 million of acquisition transaction expenses of $28.2 million in the third quarter of 2013. A reconciliation of net income to EBITDA is provided below:

Three Months Ended Nine Months Ended
September 30, September 30,
2014 2013 2014 2013
(In thousands)
Net income $ 14,413 $ 13,230 $ 39,595 $ 37,782
Plus: Provision for income taxes 7,040 8,351 22,941 23,849
Plus: Total interest expense 3,827 2,078 8,936 5,563
Plus: Depreciation and amortization 6,319 4,029 16,788 11,230
EBITDA $ 31,599 $ 27,688 $ 88,260 $ 78,424

Third Quarter 2014 Results

In discussing the company’s third quarter performance, Mark DiBlasi, President and CEO of Roadrunner, said,

“Third quarter diluted income per share before acquisition transaction expenses increased 11.4% from $0.36 in the third quarter of 2013 to $0.40 in the third quarter of 2014. We were pleased that our TL and TMS segments once again had record revenue and operating income for the third quarter. Our TL segment surpassed its previous quarterly revenue record by 13.9% and its previous quarterly record for operating income by 15.0%. Our TMS segment surpassed its previous quarterly revenue record by 6.6% and its previous quarterly record for operating income by 10.2%. Our LTL segment also surpassed its previous quarterly revenue record by 1.0%, although operating income in our LTL segment was negatively impacted by increased purchased power costs. Our third quarter 2014 results were impacted by unusually large acquisition transaction expenses primarily related to our Active Aero acquisition, as well as certain settlement and employee transition costs. These costs were substantially offset, on an after-tax basis, by net contingent earnout adjustments of $3.3 million related to prior acquisitions within our TL segment, which also reduced our effective tax rate from 38.7% for the third quarter of 2013 to 32.8% for the third quarter of 2014. Overall, organic and acquisition growth led to a 37.2% increase in third quarter 2014 revenues and a 14.1% improvement in EBITDA over the prior year quarter.

“Revenues for TL, our largest revenue segment, grew by $92.8 million, or 54.5%, during the third quarter of 2014 from the prior year third quarter. Incremental revenues from our 2013 and 2014 acquisitions accounted for $79.7 million of the increase, with the remaining $13.1 million representing 7.7% organic growth. The positive impact of our recent TL acquisitions and organic revenue growth led to a 70.4% increase in TL operating income quarter-over-quarter.

“LTL revenues grew by $6.9 million, or 4.8%, during the third quarter of 2014 from the prior year third quarter. Our LTL operating ratio deteriorated from 92.4% in the third quarter of 2013 to 96.4% in the third quarter of 2014. The primary factor contributing to the increased LTL operating ratio was increased purchased power rates in the third quarter of 2014 compared to the third quarter of 2013. We expect our LTL operating ratio to improve in future quarters as a result of management transition, operational and sales restructuring, and increased independent contractor additions, as well as pricing initiatives.

“TMS revenue grew by $36.3 million, or 71.3%, during the third quarter of 2014 from the prior year third quarter, primarily as a result of our acquisitions of Marisol International and Unitrans. The positive impact of our recent TMS acquisitions led to a 44.8% increase in TMS operating income quarter-over-quarter.”

Fourth Quarter 2014 Guidance

Commenting on guidance for the fourth quarter of 2014, Peter Armbruster, CFO of Roadrunner, said, “We anticipate our revenues for the fourth quarter to be in the range of $475 million to $500 million, representing an increase of 29% to 36% from the fourth quarter of 2013. We expect diluted income per share available to common stockholders to be between $0.33 and $0.37, compared with diluted income per share available to common stockholders of $0.29 in the prior year quarter.”

Third Quarter 2014 Segment Information

Roadrunner has three operating segments: truckload logistics (TL), less-than-truckload (LTL), and transportation management solutions (TMS). The following highlights exclude intercompany eliminations and corporate expenses.

TL revenues increased 54.5% to $262.9 million for the third quarter of 2014 from $170.1 million for the third quarter of 2013. The improvement was primarily due to increased load growth, increased utilization of Roadrunner’s TL brokerage agent network, and the acquisitions of G.W. Palmer Logistics, Rich Logistics, ISI, and Active Aero. For the third quarter of 2014, these acquisitions collectively contributed incremental TL revenues of $79.7 million. TL operating income was $18.5 million, or 7.0% of TL revenues, for the third quarter of 2014 compared with $10.8 million, or 6.4% of TL revenues, for the third quarter of 2013.

LTL revenues, including fuel, increased 4.8% to $151.1 million for the third quarter of 2014 from $144.2 million for the third quarter of 2013. LTL operating income was $5.5 million, or 3.6% of LTL revenues, for the third quarter of 2014 compared with $10.9 million, or 7.6% of LTL revenues, for the third quarter of 2013.

Summary LTL operating statistics for the three and nine months ended September 30 are shown below.

Three Months Ended September 30, Nine Months Ended September 30
2014 2013 % Change 2014 2013 % Change
Operating ratio 96.4 92.4 95.4 92.5
Tonnage (in thousands of tons) 410.5 406.3 1.0 % 1,197.0 1,180.6 1.4 %
Shipments (in thousands) 643.8 628.5 2.4 % 1,861.1 1,828.7 1.8 %
Revenue per hundredweight (incl. fuel) $ 18.33 $ 17.93 2.2 % $ 18.20 $ 17.91 1.6 %
Revenue per hundredweight (excl. fuel) $ 15.14 $ 14.73 2.8 % $ 14.96 $ 14.68 1.9 %
Weight per shipment (lbs.) 1,275 1,293 (1.4 %) 1,286 1,291 (0.4 %)
Linehaul cost per mile (excl. fuel) $ 1.29 $ 1.23 4.9 % $ 1.28 $ 1.23 4.1 %
Note: Other than operating ratio, the statistics above do not include (i) adjustments for undelivered freight required for financial statement purposes in accordance with Roadrunner’s revenue recognition policy; and (ii) non-LTL related business captured within the LTL segment.

TMS revenues increased 71.3% to $87.2 million for the third quarter of 2014 from $50.9 million for the third quarter of 2013. The improvement in revenue was primarily due to the acquisitions of Marisol International and Unitrans. For the third quarter of 2014, these acquisitions collectively contributed incremental TMS revenues of $35.3 million. TMS operating income was $6.7 million, or 7.7% of TMS revenues, for the third quarter of 2014 compared with $4.6 million, or 9.1% of TMS revenues, for the third quarter of 2013.

Conference Call

A conference call is scheduled for Wednesday, October 29, 2014 at 4:30 p.m. Eastern Time. To access the conference call, please dial 877-415-3181 (U.S.) or 857-244-7324 (International) approximately 10 minutes prior to the start of the call. Callers will be prompted for passcode 71938431. The conference call will also be available via live webcast under the Investor Relations section of Roadrunner’s website, www.rrts.com.

If you are unable to listen to the live call, a replay will be available through Wednesday, November 5, 2014, and can be accessed by dialing 888-286-8010 (U.S.) or 617-801-6888 (International). Callers will be prompted for passcode 52296099. An archived version of the webcast will also be available under the Investor Relations section of Roadrunner’s website, www.rrts.com.

About Roadrunner Transportation Systems, Inc.

Roadrunner is a leading asset-light transportation and logistics service provider offering a full suite of solutions, including customized and expedited less-than-truckload, truckload logistics, transportation management solutions, intermodal solutions, freight consolidation, inventory management, on demand expedited services, international freight forwarding, customs brokerage, and comprehensive global supply chain solutions. For more information, please visit Roadrunner’s website, www.rrts.com.

Safe Harbor Statement

This release contains forward-looking statements that relate to future events or performance, including statements regarding Roadrunner’s performance; Roadrunner’s expectation that its LTL operating ratio will improve in future quarters as a result of management transition, operational and sales restructuring, and increased independent contractor additions, as well as pricing initiatives; Roadrunner’s organic and acquisition related growth; the impact of Roadrunner’s acquisitions; and Roadrunner’s expected revenues, diluted income per share available to common stockholders, and weighted average diluted shares outstanding for the fourth quarter of 2014. These statements reflect Roadrunner’s current expectations, and Roadrunner does not undertake to update or revise these forward-looking statements, even if experience or future changes make it clear that any projected results expressed or implied in this or other company statements will not be realized. Furthermore, readers are cautioned that these statements involve risks and uncertainties, many of which are beyond Roadrunner’s control, which could cause actual results to differ materially from the forward-looking statements. These risks and uncertainties include, but are not limited to, risks related to one or more significant claims and the cost of maintaining insurance, including increased premiums and insurance in excess of prior experience levels; the cost of compliance with, liability for violations of, or modifications to existing or future governmental regulations; the effect of environmental regulations; a decrease in the levels of capacity in the over-the-road freight sector; Roadrunner’s ability to execute its acquisition strategy and to integrate acquired companies; Roadrunner’s international operations; Roadrunner’s indebtedness and compliance with the covenants in its senior credit facility; the unpredictability of and potential fluctuation in the price and availability of fuel; the current economic environment; competition in the transportation industry; Roadrunner’s reliance on independent contractors to provide transportation services to its customers; and other “Risk Factors” set forth in Roadrunner’s most recent SEC filings.

ROADRUNNER TRANSPORTATION SYSTEMS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(In thousands, except per share amounts)

Three Months Ended Nine Months Ended
September 30, September 30,
2014 2013 2014 2013
Revenues $ 498,086 $ 363,156 $ 1,340,298 $ 994,444
Operating expenses:
Purchased transportation costs 347,247 253,158 926,600 687,422
Personnel and related benefits 55,533 39,816 148,574 111,342
Other operating expenses 61,781 41,933 174,559 116,405
Depreciation and amortization 6,319 4,029 16,788 11,230
Acquisition transaction expenses 1,926 561 2,305 851
Total operating expenses 472,806 339,497 1,268,826 927,250
Operating income 25,280 23,659 71,472 67,194
Interest expense 3,827 2,078 8,936 5,563
Income before provision for income taxes 21,453 21,581 62,536 61,631
Provision for income taxes 7,040 8,351 22,941 23,849
Net income available to common stockholders $ 14,413 $ 13,230 $ 39,595 $ 37,782
Earnings per share available to common stockholders:
Basic $ 0.38 $ 0.36 $ 1.05 $ 1.06
Diluted $ 0.37 $ 0.35 $ 1.01 $ 1.01
Weighted average common stock outstanding:
Basic 37,920 36,407 37,827 35,666
Diluted 39,380 38,191 39,268 37,469

ROADRUNNER TRANSPORTATION SYSTEMS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands)

September 30,
2014
December 31,
2013
ASSETS
Current assets:
Cash and cash equivalents $ 12,666 $ 5,438
Accounts receivable, net of allowances of $3,859 and $2,957, respectively 296,130 171,165
Deferred income taxes 2,332 1,847
Prepaid expenses and other current assets 44,775 35,010
Total current assets 355,903 213,460
Property and equipment, net of accumulated depreciation of $42,721 and $30,869, respectively 141,670 96,558
Other assets:
Goodwill and intangible assets, net 735,260 550,106
Other noncurrent assets 14,568 11,756
Total other assets 749,828 561,862
Total assets $ 1,247,401 $ 871,880
LIABILITIES AND STOCKHOLDERS’ INVESTMENT
Current liabilities:
Current maturities of long-term debt $ 10,000 $ 10,938
Accounts payable 127,110 67,141
Accrued expenses and other liabilities 48,108 33,271
Total current liabilities 185,218 111,350
Long-term debt, net of current maturities 433,581 181,702
Other long-term liabilities 82,735 78,463
Total liabilities 701,534 371,515
Stockholders’ investment:
Common stock $.01 par value; 100,000 shares authorized; 37,925 and 37,564 shares issued and outstanding 379 376
Additional paid-in capital 390,196 384,292
Retained earnings 155,292 115,697
Total stockholders’ investment 545,867 500,365
Total liabilities and stockholders’ investment $ 1,247,401 $ 871,880

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