Roadrunner Raises $148 Million to Repay Debt Through Trucking’s First IPO Since 2003
This story appears in the May 24 print edition of Transport Topics.
Roadrunner Transportation Systems Inc. Cudahy, Wis., has completed trucking’s first initial public stock offering since 2003, raising $148.4 million to repay debt as the company considers acquisition.
Roadrunner Chief Executive Officer Mark DiBlasi told Transport Topics on May 17 that the stock offering was meant to reduce debt and position the company to expand its non-asset-based trucking and to make acquisitions.
“We intend to grow in terms of acquisitions, primarily logistics and truckload,” DiBlasi said, noting that discussions are under way, without identifying a target.
“There is a very large pool of truckload operators,” DiBlasi said, which could add to Roadrunner’s $138 million from that business.
“There are still opportunities on the LTL side, but there are not too many asset-based LTL providers out there.”
When shares began trading on May 13, Roadrunner became the ninth publicly traded less-than-truckload operator. That business accounted for about 70% of its $450.4 million in revenue last year.
Overnite Transportation Co. Central Freight Lines Inc. and Quality Distribution Inc. all went public in 2003. Since then, the few stock offerings in the freight sector were logistics companies, such as Echo Global Logistics Inc.
The Roadrunner stock is trading with the symbol RRTS on the New York Stock Exchange.
Roadrunner also includes Group Transportation Services Holdings Inc., a third-party logistics provider.
Roadrunner showed $128.4 million in long-term debt on its books in a regulatory filing this month. DiBlasi said the company intends to keep debt at a low level but may incur some obligations when acquisitions are made.
“Our non-asset-based model is unique and cost-effective,” he said, compared with other LTL operators that are asset-intensive.
“We had a very successful year, when other LTL carriers were struggling and many others went out of business,” he asserted. “In good times, our non-asset-based model will excel, compared to traditional asset-based carriers.”
Roadrunner’s LTL operating ratio was 97.0 in 2009, a year when publicly traded LTL operators, except Old Dominion Freight Line, lost money on that business. Old Dominion’s 2009 operating ratio was 94.3.
Roadrunner hasn’t yet disclosed first-quarter results, but DiBlasi said they would be disclosed before late June.
Roadrunner’s prospectus said the company’s first-quarter net income was $1.2 million, with operating income of $6.5 million and revenue of $127.2 million.
LTL carriers other than YRC Worldwide noted an improvement in tonnage and stabilizing freight demand in that period.
Roadrunner’s revenue fell nearly 20% last year from its 2008 total of $537.4 million, but its net loss was cut to $1.8 million from $3.8 million in 2008.
The company’s fortunes improved in the second half of last year, and tonnage growth this year was 17% in the first quarter, DiBlasi said.
“We were pleased with the IPO,” DiBlasi said. “Very few IPOs have priced in their range [of selling prices].”
Roadrunner originally estimated its share price in the offering at $14 to $16 a share. Its stock closed at $13.75 on May 13.
Most share prices of newly public companies declined as the stock market sagged, according to an Associated Press report.
Nine million new Roadrunner shares were sold, and 1.6 million shares were offered by existing shareholders American Capital Entities and Sankaty Credit Opportunities.
After the offering, buyers of the new shares owned about 30% of Roadrunner. Thayer Creek Entities, which created the company in 2005, is the majority owner.
The LTL operation is a point-to-point service instead of passing through the traditional break-bulk facility used by other carriers. Roadrunner uses a mix of contractors and owner-operators to move its freight.
Its assets consist of 1,000 trailers used for local pickup and delivery at 17 leased service centers. The company has 925 employees.
