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Roadrunner Transportation Systems Inc. on Sept. 30 announced that it would lay off 450 employees and downsize its dry van business, a truckload segment the company said had become unprofitable.
Roadrunner, a Downers Grove, Ill.-based transportation and asset-light logistics service, said it will reduce dry van tractor-and-trailer fleets by more than 50% by closing five terminal locations.
Employees subject to the workforce reduction will receive either severance or a 60-day notice, Roadrunner officials said.
The company also said it expects to incur a one-time pretax operations restructuring cost of between $12 million and $16 million, excluding the gain or loss on the sale of equipment and the write-down of assets.
The downsizing activities are expected to reduce lease obligations and debt and be substantially complete by the end of 2019, the company said. The reduction, done over the next 60 to 90 days, represents approximately 10% of the company’s total workforce, according to Roadrunner officials.
For 2018, the company had about 4,600 employees and made $2.2 billion in revenue. Roadrunner had 1,286 company-owned tractors, 1,204 lease-to-own tractors, 932 owner-operated tractors and 5,563 trailers.
“The decision to downsize the dry van business is a significant step in executing our strategy to emphasize our value-added logistics and asset-light less-than-truckload segments and increase our returns on invested capital,” CEO Curt Stoelting said in a news release. “We factored in the impact of this downsizing as part of the strategic review of our truckload segment.”
Stoelting said he believes downsizing the dry van business will improve operating margins and cash flow, reducing lease obligations and debt while allowing greater focus on the “significant opportunities” within other Roadrunner businesses.
The company signaled after second-quarter earnings that it would focus on LTL and logistics in the near future. On Aug. 7, the company reported disappointing financial results, including a net loss of $141.9 million for the second quarter, which ended June 30.
“We continued to make progress in our asset-light LTL segment in the second quarter,” Stoelting said in an earnings release. “Excluding backhaul and fuel surcharge revenue, LTL revenue grew by 3.4% in the second quarter.”
The company also is still recovering from fraudulent filings made by a former chief financial officer.
In April, the Securities and Exchange Commission formally charged former CFO Peter Armbruster and two of his associates with accounting fraud and misleading investors about the company’s financial results. Armbruster was accused of hiding expenses by improperly deferring and spreading them across multiple quarters to minimize the impact on net earnings.
He was alleged to have arbitrarily reduced certain liabilities, creating an income “cushion” that could be used in future quarters to offset expenses, according to a complaint filed in U.S. District Court for the Eastern District of Wisconsin in Milwaukee on April 3.
Two of Armbruster’s associates, Bret Naggs and Mark Wogsland, who worked as controllers in Roadrunner’s truckload business, failed to write off millions of dollars in overvalued assets and overstated receivables as part of the scheme, federal officials allege.
The trio also misled Roadrunner’s outside auditor, resulting in financial reports that overstated the company’s profits, it is alleged by SEC officials.
Roadrunner terminated Armbruster in 2017 and brought in Stoelting to head a new management team. The company also relocated its headquarters from Cudahy, Wis., to Downers Grove, Ill., and has restated its financial results dating to 2011.
Roadrunner ranks No. 17 on the Transport Topics Top 100 list of the largest for-hire carriers in North America.
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