By Agnieszka Opalka
Zipping through the fast lane, Milwaukee, WI-based Roadrunner Freight Systems Inc. is on the road to continued success in the U.S. for-hire commercial ground transportation industry. Known for its ability to provide superior service through quick and safe freight delivery, Roadrunner's differentiated business model makes it an attractive alternative to traditional national less-than-truckload ("LTL") providers.
On July 25, 2003 American Capital Strategies, Ltd. (Nasdaq: ACAS) purchased Roadrunner Freight Systems, investing $33 million in the form of senior and junior subordinated notes with warrants and common equity in the buyout, providing the company with additional financial strength to continue growing its business. Additional financing was provided by LaSalle Bank N.A. in a revolving credit facility and a senior term loan. Following the transaction, on a fully-diluted basis American Capital has 75% ownership while management retains 25% of the company.
Since 1997, American Capital has invested approximately $1.8 billion in nearly 100 middle-market companies.
For more information about American Capital's portfolio click here.
"American Capital is supporting the growth of an outstanding company that has excelled through its ability to provide superior, rapid and reliable delivery service to its diverse customer base," said American Capital Principal Jon Isaacson. "Roadrunner's differentiated business model has allowed it to surpass its competition in an industry where businesses are turning to alternatives to the traditional long-haul less-than-truckload carriers. We believe the incumbent management team, led by co-founder, President and CEO Bill Troyk and COO Barry Turner, will be able to grow the business aggressively through increased penetration in existing locations and developing new markets while continuing to focus on customer service."
Troyk co-founded Roadrunner Freight Systems in 1984 in Milwaukee, WI and built the company from a startup to a well-established organization with over $125 million in annual sales. Since its founding, Roadrunner expanded its terminal network to include Chicago, Dallas, Atlanta, Nashville, Charlotte, Los Angeles, Cincinnati and Cleveland. The company's continued sales and profit growth at existing facilities coupled with new terminal expansion has been a key to Roadrunner's success. The expanded geographic footprint has enabled a large number of shippers across a broad base of consumer and industrial manufacturing sectors to benefit from Roadrunner's unique services.
"By partnering with American Capital and LaSalle Bank we are well-positioned to enter new markets with our premium services and expand Roadrunner's national presence," said Roadrunner COO Barry Turner.
Roadrunner operates in the general U.S. for-hire commercial ground transportation market, estimated to exceed $200 billion. Specifically, Roadrunner competes in the long-haul LTL segment of the industry, an estimated market of approximately $9.6 billion. Long-haul LTL shipments typically weigh less than 10,000 lbs and are moved to destinations greater than 500 miles from their origin.
The company's business model provides for the consolidation of LTL shipments at Roadrunner facilities into full truckload quantities. The full truckloads are moved to their destination by single or team drivers, depending on the length of haul or service requirements of the shippers, thus avoiding intermediate stops at break-bulks or relays. This is in contrast to traditional national LTL carriers, which primarily move freight through a hub and spoke system of break-bulks or consolidation centers. Roadrunner's point-to-point longhaul model (versus traditional break-bulk routing) decreases the number of times freight is touched, typically affording Roadrunner's customers quicker service and reduced incidence of damage (as evidenced by the company's industry-low claims ratio of 0.7%).
As an asset-light LTL carrier, Roadrunner's model requires minimal recurring capital expenditures. This affords the company significant operating flexibility in varying economic conditions. Competing in the fast lane, Roadrunner has successfully sped past the competitive congestion and grown into an excellent company, prospering through its differentiated operating model. With an extensive network of regional terminals, a diverse and well-established customer base and the competitively unique ability to provide fast and reliable delivery service, Roadrunner has the fuel to continue on its road to success.
