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Earnings Watch: Roadrunner Profit Dives; XPO, USA Truck Report Losses

Loose capacity and a sluggish economy in the first quarter helped drive down earnings for Roadrunner, XPO and USA Truck.

Evan Lockridge
Evan LockridgeFormer Business Contributing Editor
May 5, 2016
Earnings Watch: Roadrunner Profit Dives; XPO, USA Truck Report Losses

 

6 min to read


Profit for trucking and logistics provider Roadrunner Transportation Systems Inc. (NYSE: RRTS) turned sharply lower in the first of the year as revenue eased slightly.

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Net income fell 77.4% from a year earlier to $3.1 million as earnings per share declined from 35 cents to 8 cents, less than Wall Street expectations. Revenues for the quarter decreased 4.8% to $465.6 million for the Wisconsin-based fleet.

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"For the quarter…consolidated revenue decreased $23.3 million, primarily due to the decrease in fuel surcharge revenue, which impacted revenue by $19.2 million quarter-over-quarter, and the decline in freight rates and volumes across most end markets, net of new business,” said Mark DiBlasi, CEO.

Operating income was $10.6 million, compared to $26.8 million for the prior year quarter.

“Our largest decline in operating income came from the truckload logistics segment. Margin reductions in our OEM ground and air expedite business due to excess capacity in both modes and the lack of supply chain disruptions resulted in historically low pricing and a decrease in operating income of $4.8 million,” said DiBlasi. “In addition, our truckload segment also incurred $2.3 million of downsizing costs during the first quarter of 2016 from the reduction and consolidation of certain specific operations due to a major decline in volume from a significant customer.”

Accordign to DiBlasi, Roadrunner’s less-than-truckload segment was affected by continued weak freight demand in the general industrial markets it serves and lower fuel surcharge revenue resulting in a decline in both revenues and operating income.

Roadrunner reported LTL revenues decreased 13.8% to $113.4 million due to a combination of lower fuel surcharge revenue and weak freight demand in the general industrial markets. LTL operating income was $1.2 million, or 1% of LTL revenues, for the first quarter of 2016, compared to $8.7 million, or 6.6% of LTL revenues, for the first quarter of 2015.

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Truckload revenues increased slightly to $273.8 million for the first quarter of 2016 from $272 million for the first quarter of 2015, primarily due to increases in expedited ground freight brokerage, which were partially offset by lower fuel surcharge revenues across the entire truckload segment.

The company’s global solutions revenues dropped 10.6% to $82.9 million, mainly due to lower volumes and rates in the international freight forwarding and domestic freight management businesses, partially offset by increases in the warehousing and consolidation business, according to Roadrunner.

XPO Jump in Business Doesn’t Translate into Profitability

XPO Logistics Inc. (NYSE: XPO) announced a huge increase in revenue, but its loss for the first quarter compared to a year earlier increased.

The Connecticut-based logistics and multi-modal freight transport and trucking services provider had a net loss of $23.2 million, or 21 cents per share, compared to net loss of $15.4 million, or 20 cents per share, in the 2015 quarter.

Revenue jumped 404.4% year-over-year to $3.5 billion, due in large part to its purchase of the fleets Con-way and Norbert Dentressangle last year.

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Excluding $27.1 million in one-time transaction-related costs, the company reported an adjusted net loss of $9.3 million, or a loss of 8 cents per share, in the most recent quarter versus $9.9 million a year earlier, or a loss of 13 cents per share. The per-share performance beat a consensus expectation by 10 cents, according to a survey of economists surveyed by Zacks Investment Research.

"2016 is off to a stellar start," said Bradley Jacobs, chairman and chief executive officer of XPO Logistics. "We generated $249 million of adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) in the quarter, and organic revenue growth of almost 12%, excluding fuel. Our freight brokerage and last mile businesses continued to lead our growth in North America, while in Europe, our transportation and logistics segments exceeded expectations for both sales and margins.”

According to Jacobs, the addition of Con-way’s less-than-truckload business has been positive for the company, despite what he called a challenging economic environment.

“In the first quarter, we generated $58 million of adjusted operating income from LTL, up 54% from last year's first quarter, pre-acquisition,” he said. “We're running LTL as a more efficient organization, with a $90 million run rate of profit improvement already in hand. This puts us well on the way to achieving our target of improving annual profit by $170 million to $210 million by late next year.”

Jacobs said XPO has been implementing cost saving opportunities from its acquisitions in Europe and LTL. "We're benefiting from our investments in technology, major procurement efficiencies and global cross-selling initiatives. And we have many of the industry's best operators leading all parts of the business. These are the reasons why we've been able to grow adjusted EBITDA by eight times from a year ago."

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XPO’s transportation segment generated total gross revenue of $2.3 billion for the quarter, a 308.6% increase from the same period in 2015, driven primarily due to 2015 acquisitions and organic revenue growth led by the last mile and truck brokerage businesses, according to the company.

First quarter adjusted EBITDA for the transportation segment improved to $196 million, compared with $23.3 million a year ago. First quarter operating income was $75.4 million, compared with $3.6 million a year ago.

The company's logistics segment generated gross revenue of $1.3 billion for the quarter, up 795.4% from the same period in 2015. Adjusted EBITDA was $87.8 million, up 336.8% a year earlier, due to increases in gross revenue, gross margin, adjusted EBITDA and operating income, mainly due to 2015 acquisitions.

Restructuring Results in Loss for USA Truck

Meantime, trucking and logistics provider USA Truck Inc. (NASDAQ: USAK) moved from a profit to a loss in the first quarter of the year as revenue increased for the Arkansas-based operation.

Its net loss of $1.8 million, or 19 cents per share, compares to net income of $1.6 million, or 16 cents per share, for the same quarter of 2015. Revenue dropped 16.8% to $110.6 million.

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Included in the loss was $5.3 million relating to restructuring, impairment and other costs and $800,000 related to loss on debt extinguishment. Adjusted earnings per share was 15 cents for the first quarter of 2016, compared to 20 cents per share for the same quarter of 2015.

According to President and CEO Randy Rogers, the first quarter was marked by four notable achievements.

“First, we finished assembling the senior management team we expect to lead us into the future and took major strides toward mapping out our strategy internally. We now have installed a new CEO; president, trucking; president, asset light, in the past six months, and we continue to benefit from the financial leadership and business experience of our CFO, who joined us in 2014.”

Rogers said the adjusted earnings per share “represented a solid achievement in a difficult freight market. Third, we continued to invest capital effectively by constraining fleet size, growing independent contractors, and repurchasing our shares. Fourth, we implemented significant network infrastructure changes to lighten our cost structure and move toward a more variable cost model.”

USA’s trucking segment saw first quarter revenue decline to $75.7 million from $95.8 million. It reported an operating loss of $4.4 million following an operating profit $1.6 million a year earlier. The segment also saw declines in overall miles and an increase in deadhead miles.

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The company’s logistics business, formerly known as Strategic Capacity Solutions and  changed to USAT Logistics in April, saw revenue decline to $34.9 million from $37.1 million a year earlier. Operating income fell to $2 million from nearly $3 million as revenue was flat.

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