Roadrunner Merges Refrigerated Fleets in Bid to Reverse Financial Woes
Roadrunner Transportation Systems has combined two refrigerated fleets into one temperature-controlled division, hoping to reverse the financial woes that have plagued the carrier in recent months.
The Cudahy, Wisconsin-based company consolidated M. Bruenger & Co. and R&M Transportation into a single company with more than 400 trucks and 650 trailers.
“When you think about refrigerated, it’s all about having density and capacity across the network to say ‘yes’ to the customers and get our drivers more miles,” said Paul Schlegel, executive vice president of Roadrunner Temperature Controlled. “I’m very confident we’re going to be a major player in the refrigerated industry in a very short period of time.”
Asked whether he believes Roadrunner can compete with Swift Transportation, Prime Inc. and C.R. England Inc. in the refrigerated market, Schlegel told Transport Topics, “Oh, I’m counting on it. That’s the reason I came here about six months ago.”
Swift ranks No. 6 on the Transport Topics Top 100 list of the largest U.S. and Canadian for-hire carriers. Roadrunner is No. 16, Prime Inc. is No. 18 and C.R. England is No. 23. Prime and C.R. England rank No. 1 and 2 on the refrigerated sector list, respectively, and Swift is No. 6.
Bruenger was at the center of an accounting error that forced Roadrunner to inform the Securities and Exchange Commission that it will have to fix quarterly and annual earnings reports from 2014 through 2016. The issue involved overstatements, mainly due to unrecorded expenses regarding Morgan Southern and Bruenger, both purchased in 2011 for a combined $30 million. As a result, Roadrunner will record a goodwill impairment charge between $175 million to $200 million, far beyond the $6 million in profits that industry analysts expected the company to generate.
“Part of the financial concerns exist because we didn’t necessarily take advantage of the consolidation of those companies and get rid of the duplication of efforts across our network,” Schlegel said. “Our effort is designed to deliver significantly better results because we’re not going to be crossing trucks or bidding against each other.
“When you have multiple small refrigerated carriers, they’re going to bump up against the same customers," he said. "All you’re doing when you’re running them separately is that you’re driving your own rates down because you’re competing with companies that are under the same umbrella. We’re not going to be doing that anymore.”
Earlier in March, Roadrunner reached an agreement with lenders on a temporary agreement to settle the fallout of the accounting error on its leverage ratio. Lenders often attach terms and conditions on borrowers to meet certain benchmarks in the ratio between debt and earnings each year.
The temporary agreement keeps Roadrunner from defaulting on the loans while the two sides renegotiate a long-term deal.
