Weak freight demand and excess capacity caused Cudahy-based Roadrunner Transportation Systems, Inc. to report a 77 percent drop in earnings and income for the first quarter of fiscal 2016.
Net income for the quarter was $3.1 million and the company reported earnings of 8 cents per diluted share, both down roughly 77 percent. Revenue for the quarter was down 4.8 percent to $465.6 million.
Mark DiBlasi, Roadrunner chief executive officer, said the largest declines in operating income came from the truckload logistics segment. The original equipment manufacturer ground and air expedite business had excess capacity and lack of supply chain disruptions leading to “historically low pricing.”
The less-than-load segment experienced weak demand from general industrial markets and lower fuel surcharge revenue, eating into both revenue and income. The company has sought to downsize the business and reduced the number of long haul employee drivers and trucks in favor of more cost effective purchase power and independent contractors, DiBlasi said.
“As we continue to execute our sales, service and productivity initiatives, we expect accelerated improvement in LTL results for the balance of the year,” he said.
The company incurred a total of $3 million in downsizing costs between both segments and expects to have a similar amount in the second quarter.
The company said it expects its full year earnings to be between $1.10 and $1.25 per share, excluding downsizing costs. Chief financial officer Peter Armbruster said that assumes the weak freight environment and OEM ground and air expedite rates will recover in the second half of the year, new business will build throughout the year and there were no new acquisitions.
Several analysts were skeptical of the company’s guidance during its Wednesday conference call, but DiBlasi and Armbruster repeatedly said they expect the industry would improve in the second half of the year and the company’s new business would ramp up.