Roadrunner Announces Divestitures and Completion of Strategic Transformation into Standalone National LTL Carrier

Rhea-AI Summary

Roadrunner Transportation Systems (RRTS) has completed the divestiture of its truckload segment, selling Rich Logistics and Integrated Services, Inc. and Roadrunner Temperature Controlled to strategic buyers. This marks the transition to a focused less-than-truckload (LTL) carrier, reducing liabilities by approximately $400 million and entering a new $45 million credit facility. Despite challenges posed by COVID-19, Roadrunner reported positive EBITDA for the first time in three years. New facilities in Riverside and Philadelphia are aimed at enhancing service capabilities.

Positive

• Completion of divestiture reduces liabilities by approximately $400 million.
• Entered new $45 million credit facility, strengthening the balance sheet.
• Achieved first positive EBITDA month in three years despite pandemic challenges.
• Opened new facilities in Riverside and Philadelphia to enhance service capabilities.

Negative

• Operational investments resulted in average losses of approximately $4 million per month.
• COVID-19 disruptions affected service levels despite improvements in other areas.

DOWNERS GROVE, Ill., Aug. 17, 2020 /PRNewswire/ -- Roadrunner Transportation Systems, Inc. ("Roadrunner" or the "company") (Pink: RRTS) today announced the recent closings of three transactions completing Roadrunner's divestiture of all truckload segment businesses. This includes the sale of Rich Logistics and Integrated Services, Inc. ("ISI") to an undisclosed strategic buyer, as well as the sale of Roadrunner Temperature Controlled ("RRTC Holdings, Inc.") to Laurel Oak Capital Partners.

"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 Chris Jamroz, Executive Chairman of Roadrunner.

These divestitures complete a reorganization that involved the sale of Roadrunner Intermodal Services (November 2019), Flatbed (December 2019), Prime Distribution (March 2020) and Stagecoach (April 2020). With the previously announced completion of the spin-off of Ascent Global Logistics, Inc. ("Ascent"), Roadrunner now consists solely of its less-than-truckload operations.

Paul Svindland Joins Board of Directors

Contemporaneous with the Ascent spin-off, Paul Svindland, CEO of STG Logistics, has joined Roadrunner's Board of Directors. Paul most recently served as CEO of Celadon Group, one of North America's largest asset-based truckload carriers. Prior to Celadon, Paul was Chairman and CEO of Farren International, a leading, private equity backed flatbed trucking company.

Donald C. Brown and Scott L. Dobak remain as independent directors on Roadrunner's Board and Christopher L. Doerr has moved over to the Ascent Global Logistics Board.

"With deep experience in the logistics and transportation sector, Paul will no doubt lend invaluable advice and perspective to our Board and executive leadership team as we enter Roadrunner's next chapter," said Jamroz.

New Credit Facility

Simultaneously with the completion of the Ascent spin-off, Roadrunner's existing senior secured credit facility with BMO Bank Harris, N.A. has been terminated, and the company has entered into a new $45.0 million senior secured asset-based credit facility with Crystal Financial. Roadrunner's divestitures and the spin-off of Ascent have reduced the company's balance sheet liabilities by approximately $400 million, leaving the company with a net cash position.

"We enter this new stage of Roadrunner with the healthiest balance sheet in the company's history," said Frank Hurst, President of Roadrunner Transportation Systems.

Roadrunner Freight Update

Additionally, Frank Hurst and the Roadrunner management team have provided an update on business performance and strategy to date.

"In Q4 2019, we made a deliberate shift in our LTL strategy to focus on customers and drivers, instead of short-term profitability. This change in approach led every team member to commit to a new mantra, Ship It Like You Own It," said Hurst. "It also required operational investments in Q4 2019 and Q1 2020, generating average losses of approximately $4 million per month. However, we dramatically improved transit times and launched a quality campaign that resulted in drastic reductions of delivery exceptions. With clearly improved service levels, our sales have continued to grow and enabled our team to onboard business with several new national accounts. Despite highly depressed volumes in March and April from COVID-19, we were able to return to growth in May and posted our first positive EBITDA month in three years, albeit a very modest level."

Year-to-date, the company has increased the Independent Contractor count by more than 100 drivers and has achieved the lowest 12-month turnover in recent history. The company has also launched a new analytical tool of driver performance metrics called RoadPRO to promote safety, service and operational results within the fleet.

"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," Hurst adds. "Our Ship It Like You Own It mantra embodies how we treat customers' freight, and it is gratifying to see that our customers are noticing."

As previously announced, Roadrunner Freight recently opened new facilities in Riverside, CA on July 22 and in Philadelphia on August 3 that offer significant enhancements to the company's nationwide LTL network. A new Chicago service center, with double the capacity of the current Chicago facility, will also open later this month.

"We have seen COVID-driven disruptions in pockets of our network in June and July, despite our focus on quality service. This is partially due to large growth in e-commerce volume, which created facility and staffing constraints in a few markets. Our new facilities are already making a positive impact and any service issues experienced will be rectified in the near future. I appreciate our customers' patience as we make the necessary changes to support these increased volumes of freight," said Hurst.

"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," continued Hurst. "I am proud to say we have never been as strongly positioned for the future as we are today."

About Roadrunner Transportation Systems, Inc.

Roadrunner Transportation Systems is a leading less-than-truckload provider offering high quality, reliable LTL services under the Roadrunner Freight® brand. Roadrunner's "Ship It Like You Own It" commitment guides the company to provide unparalleled service and reliable LTL solutions for customers. With 31 service centers and strategic partnerships across the country, Roadrunner delivers expansive long haul, regional and next day service in all major US markets. For more information, please visit www.rrts.com/freight. For information on joining the Roadrunner Freight team, please contact rr-humanresources@rrts.com. Independent Contractors and Owner Operators interested in driving and lease purchase opportunities can call 800-560-3758 or email ltlrecruiting@rrts.com to learn more.

Safe Harbor Statement

This press release contains forward-looking statements and information relating to, among other things, Roadrunner, its business plans and strategies, its industry and other future events. These statements include those relating to Roadrunner's shift in LTL strategy, its plan to prioritize service levels over profitability, and its ability to rectify service issues."  Forward-looking statements are often, but not always, made through the use of words or phrases such as "may," "will," "anticipate," "estimate," "plan," "project," "continuing," "ongoing," "expect," "believe," "intend," "predict," "potential," "opportunity," and similar words or phrases or the negatives of these words or phrases. These forward-looking statements are based on Roadrunner's current assumptions, expectations, and beliefs and are subject to substantial risks, estimates, assumptions, uncertainties and changes in circumstances that may cause Roadrunner's actual results, performance, initiatives, or achievements to differ materially from those expressed or implied in any forward-looking statement. Because the risks, estimates, assumptions and uncertainties referred to above could cause actual results or outcomes to differ materially from those expressed in any forward-looking statements, you should not place undue reliance on any forward-looking statements. Any forward-looking statement speaks only as of the date hereof, and, except as required by law, Roadrunner assumes no obligation and does not intend to update any forward-looking statement to reflect events or circumstances after the date hereof. For a full discussion of risks and uncertainties, see the section entitled "Risk Factors" in Roadrunner's Annual Report on Form 10-K for the year ended December 31, 2019 as filed with the Securities and Exchange Commission.

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SOURCE Roadrunner Transportation Systems

FAQ

What recent transactions did Roadrunner Transportation Systems announce?

Roadrunner announced the completion of its divestiture of all truckload segment businesses, selling Rich Logistics and Integrated Services, Inc. and Roadrunner Temperature Controlled.

How much did Roadrunner reduce its liabilities through these divestitures?

The divestitures reduced Roadrunner's liabilities by approximately $400 million.

What is the significance of the new credit facility for Roadrunner Transportation Systems?

Roadrunner entered a new $45 million senior secured asset-based credit facility, enhancing its financial stability.

Has Roadrunner Transportation Systems seen any recent financial improvements?

Yes, Roadrunner posted its first positive EBITDA month in three years despite the challenges brought by COVID-19.

What strategic changes are being implemented at Roadrunner Transportation Systems?

Roadrunner is focusing on improving service levels over short-term profitability, pivoting its strategy to enhance customer and driver engagement.