Cudahy-based Roadrunner Transportation Systems Inc. today reported third quarter net income of $5.8 million, or 14 cents per share, down from $14.4 million, or 37 cents per share, in the third quarter of 2014.
The asset-light transportation and logistics company recorded operating income of $14.4 million in the quarter, down from $25.3 million in the same period a year ago.
Revenue totaled $497.2 million in the third quarter, down from $498.1 million in the third quarter of 2014.
During the quarter, Roadrunner recorded a $5 million charge associated with the termination of independent contractor lease purchase guarantee programs, which had an unfavorable impact of about 8 cents per share. Its insurance and claims costs were also up about $3.9 million year-over-year, due to an increase severe accidents and resulting claims expense, which had an impact of about 6 cents per share.
In addition, the company saw softer demand from some industrial sectors.
“During the second half of 2014, we saw a significant increase in the number of ICs participating in lease purchase programs requiring a guarantee from us,” said Mark DiBlasi, president and chief executive officer of Roadrunner. “However, the declining quality and performance of the equipment in certain of these lease purchase programs has caused escalating repair and maintenance expenses for our ICs, which coupled with the softened demand experienced during the third quarter of 2015 resulted in increased turnover and default by certain ICs. As a result, we have experienced an acceleration of our IC recruiting costs, guarantee payments, reseating and reconditioning costs associated with these lease purchase programs. Accordingly, we decided to terminate certain lease purchase guarantee programs in favor of new lease purchase programs that do not involve a guarantee from us and only utilize newer equipment under warranty. We believe such programs will be more cost effective for both us and our ICs.
“At the end of the second quarter, consistent with our historic experience, we expected an August and September rebound that never materialized. We do not currently foresee a significant rebound in demand characteristics or spot market pricing in the fourth quarter. Accordingly, as we move into the fourth quarter of 2015, we intend to aggressively manage costs and closely monitor our mix of freight.”
