Roadrunner Transportation Systems, Inc. - FORM 10-Q/A

Roadrunner Transportation Systems, Inc. - FORM 10-Q/A - January 30, 2018

Attached files

Attached files

Roadrunner Transportation Systems, Inc. Reports

file	filename
EX-32.1 - EXHIBIT 32.1 - Roadrunner Transportation Systems, Inc.	rrts-20160331xex32110qa.htm
EX-31.1 - EXHIBIT 31.1 - Roadrunner Transportation Systems, Inc.	rrts-20160331xex31110qa.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q/A

(Amendment No. 1)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended March 31, 2016

Commission File Number 001-34734

ROADRUNNER TRANSPORTATION SYSTEMS, INC.

(Exact Name of Registrant as Specified in Its Charter)



Delaware		20-2454942
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

1431 Opus Place, Suite 530 Downers Grove, Illinois		60515
(Address of Principal Executive Offices)		(Zip Code)

(414) 615-1500

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes o No x

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

As of January 24, 2018, there were outstanding 38,423,391 shares of the registrant’s Common Stock, par value $.01 per share.

EXPLANATORY NOTE

We are filing this Amendment No. 1 on Form 10-Q/A (the “Amendment” or “Form 10-Q/A”) to amend our Quarterly Report on Form 10-Q for the quarter ended March 31, 2016, which was originally filed with the Securities and Exchange Commission (“SEC”) on May 10, 2016 (the “Original Form 10-Q”). The purpose of this Amendment is to restate our previously issued condensed consolidated financial statements and related financial information in the Original Form 10-Q. This Form 10-Q/A also revises our previous evaluation of disclosure controls and procedures.

Restatement Background

In November 2016, we commenced an internal investigation into certain accounting discrepancies at our Morgan Southern and Bruenger operating companies. Subsequently, an independent internal investigation was undertaken by the Audit Committee of our Board of Directors (the “Audit Committee”), with assistance from outside counsel and outside consultants to provide forensic and investigative support (the “Audit Committee Investigation”). The expanded Audit Committee Investigation included detailed reviews of financial records at other operating companies and at our corporate headquarters. The Audit Committee Investigation identified material accounting errors that impacted substantially all financial statement line items and disclosures.

On January 27, 2017, the Audit Committee, as a result of the information obtained in connection with the ongoing internal investigation and after considering the recommendation of management, determined that previously issued (1) consolidated financial statements as of December 31, 2015 and 2014 and for the three years in the period ended December 31, 2015; (2) unaudited condensed consolidated financial statements for the quarterly periods in the years ended December 31, 2015 and 2014; and (3) the unaudited condensed consolidated financial statements for the quarterly periods ended March 31, 2016, June 30, 2016, and September 30, 2016, should no longer be relied upon due to the identification of material accounting errors.

Based on the Audit Committee Investigation, current management determined that there were deficiencies in the design and/or execution of internal controls that constituted material weaknesses. Current management determined that structural and environmental factors, including the increased size and complexity arising from the acquisition of 25 non-public companies between February 2011 and September 2015, the inconsistency of our accounting systems, policies and procedures, and management override of internal controls contributed to the material weaknesses and resulting material accounting errors. Our internal controls failed to prevent or were overridden by management in certain instances to allow recording accounting entries without appropriate support, recording accounting entries that were inconsistent with information known by management at the time, not communicating relevant information within our organization and, in some cases, withholding information from our independent directors, our Audit Committee, and our independent auditors, which resulted in material accounting errors.

As a result of these errors, we have restated the unaudited condensed consolidated financial statements and related information as of March 31, 2016 and December 31, 2015 and for the three months ended March 31, 2016 and 2015.

Other Amended Filings

In addition to this Form 10-Q/A, we are concurrently filing an amendment to our Annual Report on Form 10-K for the year ended December 31, 2015 to restate our previously issued consolidated financial statements and related financial information and revise our previous conclusion with respect to the effectiveness of our internal control over financial reporting. We are also concurrently filing amendments to our Quarterly Reports on Form 10-Q for the quarters ended June 30, 2016 and September 30, 2016 to restate our previously issued condensed consolidated financial statements and related financial information presented therein and to revise our previous conclusion with respect to the effectiveness of our disclosure controls and procedures.

Internal Control Consideration

Management has determined that the material accounting errors resulted from deficiencies in our internal control over financial reporting that constitute material weaknesses.

Items Amended in this Form 10-Q/A

For the convenience of the reader, this Form 10-Q/A amends and restates the Original Form 10-Q in its entirety. As a result, it includes both items that have been changed as a result of the restatement and items that are unchanged from the Original Form 10-Q. This Form 10-Q/A speaks as of the date of the Original Form 10-Q and has not been updated to reflect events occurring subsequent to the filing of the Original Form 10-Q other than those associated with the restatement of our condensed consolidated financial statements. The following items in the Original Form 10-Q have been amended as a result of, and to reflect, the restatement:

•Part I. Item 1. Financial Statements

•Part I. Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

•Part I. Item 4. Controls and Procedures

•Part II. Item 1. Legal Proceedings

In accordance with applicable SEC rules, this Form 10-Q/A includes new certifications required by Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 from our Chief Executive Officer (as Principal Executive Officer and Principal Financial Officer) dated as of the filing date of this Form 10-Q/A.

ROADRUNNER TRANSPORTATION SYSTEMS, INC.

QUARTERLY REPORT ON FORM 10-Q/A

FOR THE QUARTER ENDED MARCH 31, 2016

TABLE OF CONTENTS



PART I. FINANCIAL INFORMATION	1
Item 1. Financial Statements (Unaudited)	1
Condensed Consolidated Balance Sheets	1
Condensed Consolidated Statements of Operations	2
Condensed Consolidated Statements of Cash Flows	3
Notes to Unaudited Condensed Consolidated Financial Statements	4
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	20
Item 3. Quantitative and Qualitative Disclosures about Market Risk	27
Item 4. Controls and Procedures	27

PART II. OTHER INFORMATION	29
Item 1. Legal Proceedings	29
Item 1A. Risk Factors	30
Item 6. Exhibits	30

Signatures	31

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PART I - FINANCIAL INFORMATION



ITEM 1.	FINANACIAL STATEMENTS.

ROADRUNNER TRANSPORTATION SYSTEMS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands, except par value)



	March 31, 2016		December 31, 2015
	As Restated ⁽¹⁾		As Restated ⁽¹⁾
ASSETS
Current assets:
Cash and cash equivalents	$	6,868	$	7,930
Accounts receivable, net of allowances of $14,154 and $14,026, respectively	258,797		260,029
Deferred income taxes	20,338		20,891
Income tax receivable	21,289		20,663
Prepaid expenses and other current assets	32,404		37,051
Total current assets	339,696		346,564
Property and equipment, net of accumulated depreciation of $71,528 and $64,780, respectively	193,540		195,364
Other assets:
Goodwill	683,379		682,810
Intangible assets, net	73,547		75,694
Other noncurrent assets	7,920		7,321
Total other assets	764,846		765,825
Total assets	$	1,298,082	$	1,307,753
LIABILITIES AND STOCKHOLDERS’ INVESTMENT
Current liabilities:
Current maturities of debt	$	416,110	$	432,830
Accounts payable	125,242		116,166
Accrued expenses and other current liabilities	79,491		81,922
Total current liabilities	620,843		630,918
Long-term deferred tax liabilities	105,455		105,088
Other long-term liabilities	14,313		15,308
Total liabilities	740,611		751,314
Commitments and contingencies (Note 10)
Stockholders’ investment:
Common stock $.01 par value; 100,000 shares authorized; 38,318 and 38,266 shares issued and outstanding	383		383
Additional paid-in capital	397,385		397,253
Retained earnings	159,703		158,803
Total stockholders’ investment	557,471		556,439
Total liabilities and stockholders’ investment	$	1,298,082	$	1,307,753

⁽¹⁾ See Note 13 “Restatement of Previously Issued Financial Statements.”

See accompanying notes to unaudited condensed consolidated financial statements.

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ROADRUNNER TRANSPORTATION SYSTEMS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(In thousands, except per share amounts)



	Three Months Ended
	March 31,
	2016		2015
	As Restated ⁽¹⁾		As Restated ⁽¹⁾
Revenues	$	466,546	$	488,834
Operating expenses:
Purchased transportation costs	308,039		327,377
Personnel and related benefits	68,349		62,964
Other operating expenses	73,873		71,212
Depreciation and amortization	9,209		6,807
Total operating expenses	459,470		468,360
Operating income	7,076		20,474
Interest expense	5,608		4,609
Income before provision for income taxes	1,468		15,865
Provision for income taxes	568		6,045
Net income	$	900	$	9,820
Earnings per share:
Basic	$	0.02	$	0.26
Diluted	$	0.02	$	0.25
Weighted average common stock outstanding:
Basic	38,284		38,011
Diluted	38,372		39,324

⁽¹⁾ See Note 13 “Restatement of Previously Issued Financial Statements.”

See accompanying notes to unaudited condensed consolidated financial statements.

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ROADRUNNER TRANSPORTATION SYSTEMS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)



	Three Months Ended
	March 31,
	2016			2015
	As Restated ⁽¹⁾			As Restated ⁽¹⁾
Cash flows from operating activities:
Net income	$	900		$	9,820
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	9,886			7,325
Loss on disposal of property and equipment	496			291
Share-based compensation	549			796
Adjustment to contingent purchase obligations	—			(244		)
Provision for bad debts	764			1,209
Tax deficiency (excess tax benefit) on share-based compensation	253			(811		)
Deferred tax provision	367			607
Changes in:
Accounts receivable	468			(3,745		)
Income tax receivable	(626		)	(1,506		)
Prepaid expenses and other assets	3,581			159
Accounts payable	9,076			(10,540		)
Accrued expenses and other liabilities	(2,241		)	8,005
Net cash provided by operating activities	23,473			11,366
Cash flows from investing activities:
Capital expenditures	(6,047		)	(14,932		)
Proceeds from sale of property and equipment	213			522
Net cash used in investing activities	(5,834		)	(14,410		)
Cash flows from financing activities:
Borrowings under revolving credit facilities	51,665			32,764
Payments under revolving credit facilities	(65,314		)	(26,764		)
Debt payments	(3,750		)	(2,500		)
Payments of contingent purchase obligations	—			(1,906		)
Proceeds from issuance of common stock net of issuance costs	—			2,178
Proceeds from issuance of restricted stock, net of taxes paid	(164		)	(839		)
(Tax deficiency) excess tax benefit on share-based compensation	(253		)	811
Reduction of capital lease obligation	(885		)	(101		)
Net cash (used in) provided by financing activities	(18,701		)	3,643
Net (decrease) increase in cash and cash equivalents	(1,062		)	599
Cash and cash equivalents:
Beginning of period	7,930			10,809
End of period	$	6,868		$	11,408
Supplemental cash flow information:
Cash paid for interest	$	3,734		$	3,888
Cash paid for income taxes (net of refunds)	$	(79	)	$	1,112

⁽¹⁾ See Note 13 “Restatement of Previously Issued Financial Statements.”

See accompanying notes to unaudited condensed consolidated financial statements.

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Roadrunner Transportation Systems, Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

1. Organization, Nature of Business and Significant Accounting Policies

Nature of Business

Roadrunner Transportation Systems, Inc. (the “Company”) is headquartered in Cudahy, Wisconsin and has the following three segments: Truckload Logistics (“TL”), Less-than-Truckload (“LTL”), and Global Solutions. Within its TL business, the Company operates a network of 48 TL service centers and 24 company dispatch offices and is augmented by over 100 independent brokerage agents. Within its LTL business, the Company operates 47 LTL service centers throughout the United States, complemented by relationships with over 150 delivery agents. Within its Global Solutions business, the Company operates from seven service centers, ten dispatch offices, and four freight consolidation and inventory management centers throughout the United States. From pickup to delivery, the Company leverages relationships with a diverse group of third-party carriers to provide scalable capacity and reliable, customized service to its customers, including domestic and international air and ocean transportation services. The Company operates primarily in the United States.

Principles of Consolidation

The accompanying unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). All intercompany balances and transactions have been eliminated in consolidation. In the Company's opinion, except as noted below with respect to the change in accounting principle, the change in segments, and the adjustments related to the restatement of previously issued financial statements as disclosed in Note 13, these financial statements include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the operations for the interim periods presented. Interim results are not necessarily indicative of results for a full year.

Change in Accounting Principle

On January 1, 2016, the Company adopted a new methodology for accounting for debt issuance costs in accordance with the Accounting Standards Update No. 2015-03, Interest - Imputation of Interest (Subtopic 835-30), which requires debt issuance costs related to a recognized debt liability in the balance sheet to be presented as a direct reduction from the carrying amount of that debt liability. The change in methodology has been applied retrospectively. The balance of the debt issuance costs has been reclassified from other noncurrent assets to a direct reduction of debt on the condensed consolidated balance sheets as of March 31, 2016 and December 31, 2015.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Segment Reporting

The Company determines its segments based on the information utilized by the chief operating decision maker, the Company’s Chief Executive Officer, to allocate resources and assess performance. Based on this information, the Company has determined that it has three segments: TL, LTL, and Global Solutions. In 2016, the Company realigned two of its operating companies to different existing segments based on consideration of services provided and consistent with how the business is viewed by the chief operating decision maker. The change in segments, which affected the TL and Global Solutions segments, did not have any impact on previously reported consolidated financial results, but prior year segment results have been retrospectively revised to align with the new segment structure.

New Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2014-09 (“ASU 2014-09”), which was updated in August 2015 by Accounting Standards Update No. 2015-14, Revenue from Contracts with Customers (Topic 606). The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In March 2016, the FASB issued Accounting Standards Update No. 2016-08 (“ASU 2016-08”), Revenue from Contracts with Customers - Principal versus Agent Considerations (Reporting Revenue Gross versus Net). Under ASU 2016-08, when another party is involved in providing goods or services to a customer, an entity is required to determine whether the nature of its promise is to provide the specified good or service (that is, the entity is a principal) or to a

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rrange for that good or service to be provided by another party. When the principal entity satisfies a performance obligation, the entity recognizes revenue in the gross amount. When an entity that is an agent satisfies the performance obligation, that entity recognizes revenue in the amount of any fee or commission to which it expects to be entitled. Both ASU 2014-09 and ASU 2016-08 will be effective for the Company in 2018. The Company is in the process of evaluating the guidance in these Accounting Standards Updates and has not yet determined if the adoption of this guidance will have a material impact on the Company’s consolidated financial statements.

In November 2015, the FASB issued Accounting Standards Update No. 2015-17, Balance Sheet Classification of Deferred Taxes (Topic 740), which will be effective for the Company in 2017. The amendments in this update require that deferred tax liabilities and assets be classified as noncurrent in the statement of financial position. Under this amendment, deferred tax liabilities and assets would still be offset and presented as a single amount. Early adoption of the amendments is permitted and may either be applied prospectively or retrospectively. Deferred tax assets are currently reported as deferred income taxes and included as current assets in the condensed consolidated balance sheets. Adoption of the revised Accounting Standard will require the Company to reclassify the balance currently reported as deferred income taxes to other long-term liabilities in the condensed consolidated balance sheets.

In February 2016, the FASB issued Accounting Standards Update No. 2016-02, Leases (Topic 842), which will be effective for the Company in 2019. For financing leases, a lessee is required to: 1) recognize a right-of-use asset and a lease liability, initially measured at the present value of the lease payments; 2) recognize interest on the lease liability separately from amortization of the right-of-use asset; and 3) classify repayments of the principal portion of the lease liability within financing activities and payments of interest on the lease liability and variable lease payments within operating activities in the statement of cash flows. For operating leases, a lessee is required to: 1) recognize the right-to-use asset and a lease liability, initially measured at the present value of the lease payments; 2) recognize a single lease cost, calculated so that the cost of the lease is allocated over the lease term on a generally straight-line basis; and 3) classify all cash payments within operating activities in the statement of cash flows. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities. If a lessee makes this election, it should recognize lease expense for such leases generally on a straight-line basis over the lease term. The Company is in the process of evaluating the guidance in this Accounting Standards Update and has not yet determined if the adoption of this guidance will have a material impact on the Company’s consolidated financial statements.

In March 2016, the FASB issued Accounting Standards Update No. 2016-09, Compensation - Stock Compensation (Topic 718), Improvements to Share-Based Payment Accounting (“ASU 2016-09”). ASU 2016-09 will be effective for the Company in 2017 and includes simplification of the following aspects of share-based payment transactions:

Accounting for income taxes - All excess tax benefits and tax deficiencies (including tax benefits of dividends on share-based payment awards) should be recognized as income tax expense or benefit in the income statement. The tax effects of exercised or vested awards should be treated as discrete items in the reporting period in which they occur. An entity also should recognize excess tax benefits regardless of whether the benefit reduces taxes payable in the current period.

Classification of excess tax benefits on the statement of cash flow - Excess tax benefits should be classified along with other income tax cash flows as an operating activity.

Forfeitures - An entity can make an entity-wide accounting policy election to either estimate the number of awards that are expected to vest (current GAAP) or account for forfeitures when they occur.

The Company expects to prospectively adopt ASU 2016-09 in January 2017. Upon adoption of ASU 2016-09 in January 2017, the Company will recognize any excess tax benefits or tax deficiencies through the condensed consolidated statements of operations. The Company has historically been able to offset excess tax benefits and/or tax deficiencies against taxes payable, so no cumulative effect adjustment to retained earnings is expected upon adoption. Effective January 1, 2017, the Company will no longer present excess tax benefits and/or tax deficiencies under both operating activities and financing activities within the condensed consolidated statements of cash flows for any period presented. The Company will elect to recognize forfeitures as they occur and the Company expects that the cumulative effect of adjustments to retained earnings, if any, will be de minimis.

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2. Acquisitions

On July 28, 2015, the Company acquired all of the outstanding partnership interests of Stagecoach Cartage and Distribution LP (“Stagecoach”) for the purpose of expanding its presence within the TL segment. Cash consideration paid was $32.3 million. The acquisition was financed with borrowings under the Company's credit facility discussed in Note 5. The Stagecoach purchase agreement calls for contingent consideration in the form of a contingent purchase obligation capped at $5.0 million. The former owners of Stagecoach are entitled to receive a payment equal to the amount by which Stagecoach's operating income before depreciation and amortization, as defined in the purchase agreement, exceeds $7.0 million for the twelve month periods ending July 31, 2016, 2017, 2018, and 2019. Approximately $4.1 million was recorded as a contingent purchase obligation on the opening balance sheet.

The results of operations and financial condition of this acquisition have been included in the Company's condensed consolidated financial statements since its acquisition date. The acquisition of Stagecoach is considered immaterial. The goodwill for the acquisition is a result of acquiring and retaining the existing workforce and expected synergies from integrating the operations into the Company. Purchase accounting for the Stagecoach acquisition is considered final except for long-term assets, deferred taxes, and goodwill, as final information was not available as of March 31, 2016.

3. Goodwill and Intangible Assets

Goodwill represents the excess of the purchase price of all acquisitions over the estimated fair value of the net assets acquired. The Company evaluates goodwill and intangible assets for impairment at least annually or more frequently whenever events or changes in circumstances indicate that the asset may be impaired, or in the case of goodwill, the fair value of the reporting unit is below its carrying amount. The analysis of potential impairment of goodwill requires a two-step approach that begins with the estimation of the fair value at the reporting unit level. The Company has four reporting units for its three segments: one reporting unit for its TL segment; one reporting unit for its LTL segment; and two reporting units for its Global Solutions segment.

For purposes of the impairment analysis, the fair value of the Company's reporting units is estimated based upon an average of an income fair value approach and a market fair value approach, both of which incorporate numerous assumptions and estimates such as company forecasts, discount rates, and growth rates, among others. The determination of fair value requires considerable judgment and is highly sensitive to changes in the underlying assumptions. The Company completed the annual impairment analysis as of July 1, 2015, and determined no impairment had occurred.

A decline in TL revenues, from TL forecasted revenues, due to declines in freight volumes and lower pricing yield during the quarter ended March 31, 2016, resulted in a triggering event that required the Company to perform an interim goodwill impairment analysis of its TL reporting unit as of March 31, 2016. The Company completed its interim impairment analysis of the TL reporting unit and determined no impairment had occurred. As a result, there is no goodwill impairment for any of the periods presented in the Company's condensed consolidated financial statements.

As indicated in Note 1, in connection with the change in segments, the Company reallocated goodwill of $77.5 million between the TL and Global Solutions segments as of December 31, 2015. Additionally, the goodwill balances have been adjusted for the effects of the restatement discussed in Note 13. The following is a rollforward of goodwill from December 31, 2015 to March 31, 2016 by segment (in thousands):



	TL		LTL		Global Solutions		Total
Goodwill balance as of December 31, 2015	$	254,940	$	197,312	$	230,558	$	682,810
Adjustments to goodwill for purchase accounting	569		—		—		569
Goodwill balance as of March 31, 2016	$	255,509	$	197,312	$	230,558	$	683,379

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Intangible assets consist primarily of customer relationships acquired from business acquisitions. As indicated in Note 1, in connection with the change in segments, the Company reallocated net intangible assets of $2.7 million between the TL and Global Solutions segments as of December 31, 2015. Additionally, the intangible asset balances have been adjusted for the effects of the restatement discussed in Note 13. Intangible assets as of March 31, 2016 and December 31, 2015 were as follows (in thousands):



	March 31, 2016							December 31, 2015
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Value		Gross Carrying Amount		Accumulated Amortization			Net Carrying Value
TL	$	57,468	$	(10,922	)	$	46,546	$	57,468	$	(9,714	)	$	47,754
LTL	1,358		(1,033		)	325		1,358		(1,017		)	341
Global Solutions	38,427		(11,751		)	26,676		38,427		(10,828		)	27,599
Total	$	97,253	$	(23,706	)	$	73,547	$	97,253	$	(21,559	)	$	75,694

The customer relationships intangible assets are amortized over their estimated five to 12 year useful lives. Amortization expense was $2.1 million and $2.0 million for the three months ended March 31, 2016 and 2015, respectively. Estimated amortization expense for each of the next five years based on intangible assets as of March 31, 2016 is as follows (in thousands):



Remainder 2016	$	6,418
2017	8,447
2018	8,183
2019	7,879
2020	7,506
2021	7,324
Thereafter	27,790
Total	$	73,547

4. Fair Value Measurement

Accounting guidance on fair value measurements for certain financial assets and liabilities requires that assets and liabilities carried at fair value be classified and disclosed in one of the following three categories:

Level 1 — Quoted market prices in active markets for identical assets or liabilities.

Level 2 — Observable market-based inputs or unobservable inputs that are corroborated by market data.

Level 3 — Unobservable inputs reflecting the reporting entity’s own assumptions or external inputs from inactive markets.

A financial asset’s or liability’s classification within the hierarchy is determined based on the lowest level of input that is significant to the fair value measurement.

Certain of the Company’s acquisitions contain contingent purchase obligations as described in Note 2. The contingent purchase obligation related to acquisitions is measured at fair value on a recurring basis, according to the valuation techniques the Company used to determine fair value. Changes to the fair value are recognized as income or expense within other operating expenses in the condensed consolidated statements of operations. In measuring the fair value of the contingent purchase obligation, the Company used an income approach that considers the expected future earnings of the acquired businesses, for the varying performance periods, based on historical performance and the resulting contingent payments, discounted at a risk-adjusted rate.

The following table presents information, as of March 31, 2016 and December 31, 2015, about the Company’s financial liabilities (in thousands):



	March 31, 2016
	Level 1		Level 2		Level 3		Fair Value
Contingent purchase obligation related to acquisitions	$	—	$	—	$	4,913	$	4,913
Total liabilities at fair value	$	—	$	—	$	4,913	$	4,913

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	December 31, 2015
	Level 1		Level 2		Level 3		Fair Value
Contingent purchase obligation related to acquisitions	$	—	$	—	$	4,913	$	4,913
Total liabilities at fair value	$	—	$	—	$	4,913	$	4,913

The table below sets forth a reconciliation of the Company’s beginning and ending Level 3 financial liability balance for the three months ended March 31, 2016 and 2015 (in thousands):



	Three Months Ended
	March 31,
	2016		2015
Balance, beginning of period	$	4,913	$	6,842
Payments of contingent purchase obligations	—		(1,906		)
Interest expense	—		90
Adjustments to contingent purchase obligations ⁽¹⁾	—		(244		)
Balance, end of period	$	4,913	$	4,782


(1)	Adjustments to contingent purchase obligations are reported in other operating expenses in the condensed consolidated statements of operations.

5. Debt

Debt as of March 31, 2016 and December 31, 2015 consisted of the following (in thousands):



	March 31, 2016			December 31, 2015
Senior debt:
Revolving credit facility	$	129,500		$	143,149
Term loan	292,500			296,250
Total debt	422,000			439,399
Less: Debt issuance costs	(5,890		)	(6,569		)
Total debt, net of debt issuance costs	416,110			432,830
Less: Current maturities	(416,110		)	(432,830		)
Total debt, net of current maturities	$	—		$	—

On September 24, 2015, the Company entered into a sixth amended and restated credit agreement (the “credit agreement”) with U.S. Bank National Association and other lenders, which increased the revolving credit facility from $350.0 million to $400.0 million and the term loan from $200.0 million to $300.0 million. The credit facility matures on July 9, 2019. Principal on the term loan is due in quarterly installments of $3.8 million.

The credit agreement is collateralized by all assets of the Company and contains certain financial covenants, including a minimum fixed charge coverage ratio and a maximum cash flow leverage ratio. The required maximum cash flow leverage ratio is 3.75 to 1.0 as of March 31, 2016 and decreases to 3.50 to 1.0 as of June 30, 2016. However, after considering the effects of the restatement, the Company was not in compliance with its financial covenants contained in the credit agreement as of March 31, 2016 and accordingly, the Company's senior debt has been classified as current on the condensed consolidated balance sheets.

Additionally, the credit agreement contains negative covenants limiting, among other things, additional indebtedness, capital expenditures, transactions with affiliates, additional liens, sales of assets, dividends, investments, advances, prepayments of debt, mergers and acquisitions, and other matters customarily restricted in such agreements. The credit agreement also prohibits the Company from paying dividends without the consent of the lenders.

The Company categorizes the borrowings under the credit agreement as Level 2 in the fair value hierarchy described in Note 4. The carrying value of the Company's debt approximates fair value as the debt agreement bears interest based on prevailing variable market rates currently available. Borrowings under the credit agreement bear interest at either (a) the Eurocurrency Rate (as defined in the credit agreement), plus an applicable margin in the range of 2.0% to 3.25%, or (b) the Base Rate (as defined in the credit agreement), plus an applicable margin in the range of 1.0% to 2.25%. The revolving credit facility also provides for the issuance of up to $40.0 million in letters of credit. As of March 31, 2016, the Company had outstanding letters of credit totaling

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$21.3 million. As of March 31, 2016, total availability under the revolving credit facility was $249.2 million and the average interest rate on the credit agreement was 3.9%.

6. Stockholders’ Investment

Changes in stockholders’ investment for the three months ended March 31, 2016 and 2015 consisted of the following (in thousands):



	Three Months Ended
	March 31,
	2016			2015
Beginning balance	$	556,439		$	524,287
Net income	900			9,820
Share-based compensation	549			796
Issuance of restricted stock units, net of taxes paid	(164		)	(839		)
Issuance of common stock from stock options	—			2,178
(Tax deficiency) excess tax benefit on share-based compensation	(253		)	811
Ending balance	$	557,471		$	537,053

7. Earnings Per Share

Basic earnings per common share is calculated by dividing net income by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share is calculated by dividing net income by the weighted average common stock outstanding plus stock equivalents that would arise from the assumed exercise of stock options, the conversion of warrants, and the delivery of stock underlying restricted stock units using the treasury stock method. There is no difference, for any of the periods presented, in the amount of net income used in the computation of basic and diluted earnings per share.

The Company had stock options and warrants outstanding of 2,575,585 as of March 31, 2016 that were not included in the computation of diluted earnings per share because they were not assumed to be exercised under the treasury stock method or because they were anti-dilutive. As of March 31, 2015, all stock options, warrants, and restricted stock units were included in the computation of diluted earnings per share. The following table reconciles basic weighted average common stock outstanding to diluted weighted average common stock outstanding (in thousands):



	Three Months Ended
	March 31,
	2016	2015
Basic weighted average common stock outstanding	38,284	38,011
Effect of dilutive securities
Employee stock options	9	118
Warrants	55	1,140
Restricted stock units	24	55
Diluted weighted average common stock outstanding	38,372	39,324

8. Income Taxes

The effective income tax rate was 38.7% for the three months ended March 31, 2016 and 38.1% for the three months ended March 31, 2015, respectively. In determining the provision for income taxes, the Company used an estimated annual effective tax rate, which was based on expected annual income, statutory tax rates, and the Company's best estimate of non-deductible and non-taxable items of income and expense. Income tax expense varies from the amount computed by applying the federal corporate income tax rate of 35.0% to income before income taxes primarily due to state income taxes, net of federal income tax effect, and adjustments for permanent differences.

9. Guarantees

The Company provides a guarantee for a portion of the value of certain independent contractors' (“IC”) leased tractors. The guarantees expire at various dates through 2020. The potential maximum exposure under these lease guarantees was approximately $15.5 million as of March 31, 2016. Upon an IC default, the Company has the option to purchase the tractor or return the tractor to the leasing company if the residual value is greater than the Company’s guarantee. Alternatively, the Company can contract another IC to assume the lease. The Company estimated the fair value of its liability under this on-going guarantee to be $4.0

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million and $4.7 million as of March 31, 2016 and December 31, 2015, respectively.

During the third quarter of 2015 the Company experienced an acceleration of its IC recruiting costs, guarantee payments, and reseating and reconditioning costs associated with these lease purchase programs. Accordingly, the Company decided to terminate certain lease purchase guarantee programs in favor of new lease purchase programs that do not involve a guarantee from the Company and utilize newer equipment under warranty. As of December 31, 2015, the Company recorded a loss reserve of $1.3 million in accrued expenses and other current liabilities. There was no loss reserve recorded as of March 31, 2016. The Company paid $2.9 million and $1.0 million for its guarantee during the first quarter of 2016 and 2015, respectively.

10. Commitments and Contingencies

In the ordinary course of business, the Company is a defendant in several legal proceedings arising out of the conduct of its business. These proceedings include claims for property damage or personal injury incurred in connection with the Company’s services. Although there can be no assurance as to the ultimate disposition of these proceedings, the Company does not believe, based upon the information available at this time, that these property damage or personal injury claims, in the aggregate, will have a material impact on its consolidated financial statements. The Company maintains liability insurance coverage for claims in excess of $500,000 per occurrence and cargo coverage for claims in excess of $100,000 per occurrence. The Company believes it has adequate insurance to cover losses in excess of the deductible amount. As of March 31, 2016 and December 31, 2015, the Company had reserves for estimated uninsured losses of $23.0 million and $25.9 million, respectively, included in accrued expenses and other current liabilities.

In addition to the legal proceedings described above, like many others in the transportation services industry, the Company is a defendant in five purported class-action lawsuits in California alleging violations of various California labor laws and one purported class-action lawsuit in Illinois alleging violations of the Illinois Wage Payment and Collection Act. The plaintiffs in each of these lawsuits seek to recover unspecified monetary damages and other items. In addition, the California Division of Labor Standards and Enforcement has brought administrative actions against the Company on behalf of seven individuals alleging that the Company violated California labor laws. Given the early stage of all of the proceedings described in this paragraph, the Company is not able to assess with certainty the outcome of these proceedings or the amount or range of potential damages or future payments associated with these proceedings at this time. The Company believes it has meritorious defenses to these actions and intends to defend these proceedings vigorously. However, any legal proceeding is subject to inherent uncertainties, and the Company cannot assure that the expenses associated with defending these actions or their resolution will not have a material adverse effect on its business, operating results, or financial condition.

11. Related Party Transactions

The Company has an advisory agreement with HCI Equity Management L.P. (“HCI”) to pay transaction fees and an annual advisory fee of $0.1 million. The Company paid an aggregate of $0.2 million to HCI for advisory fees and travel expenses during the three months ended March 31, 2016. As of March 31, 2015, the Company owed $0.1 million to HCI for the advisory fee and travel expenses incurred. No money was paid to HCI for the three months ended March 31, 2015.

The Company has a number of dedicated carriers that haul freight for the operating companies that are owned by employees of the operating companies. The Company paid an aggregate of $1.7 million and $1.4 million to these carriers during the three months ended March 31, 2016 and 2015, respectively.

The Company has a number of facility leases with related parties and paid an aggregate of $0.6 million and $0.1 million under these leases during the three months ended March 31, 2016 and 2015, respectively.

12. Segment Reporting

The Company determines its segments based on the information utilized by the chief operating decision maker, the Company’s Chief Executive Officer, to allocate resources and assess performance. Based on this information, the Company has determined that it has three segments: TL, LTL, and Global Solutions. As indicated in Note 1, the Company realigned two of its operating companies into different segments. Segment disclosures as of December 31, 2015 and for the three months ended March 31, 2015 have been retrospectively revised to reflect this change in segments.

These segments are strategic business units through which the Company offers different services. The Company evaluates the performance of the segments primarily based on their respective revenues and operating income. Accordingly, interest expense and other non-operating items are not reported in segment results. In addition, the Company has disclosed corporate, which is not a segment and includes acquisition transaction expenses, corporate salaries, and share-based compensation expense.

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The following table reflects certain financial data of the Company’s segments, which has been adjusted for the effects of the restatement described in Note 13, for the three months ended March 31, 2016 and 2015 and as of March 31, 2016 and December 31, 2015 (in thousands):



	Three Months Ended
	March 31,
	2016			2015
Revenues:
TL	$	273,344		$	271,859
LTL	114,353			131,645
Global Solutions	83,378			92,746
Eliminations	(4,529		)	(7,416		)
Total	466,546			488,834
Operating income:
TL	$	3,798		$	13,398
LTL	1,745			7,742
Global Solutions	7,404			5,970
Corporate	(5,871		)	(6,636		)
Total operating income	7,076			20,474
Interest expense	5,608			4,609
Income before provision for income taxes	$	1,468		$	15,865
Depreciation and amortization:
TL	$	6,742		$	4,494
LTL	869			727
Global Solutions	1,222			1,276
Corporate	376			310
Total	$	9,209		$	6,807
Capital expenditures:
TL	$	3,138		$	13,652
LTL	1,111			563
Global Solutions	1,689			63
Corporate	109			654
Total	$	6,047		$	14,932



	March 31, 2016			December 31, 2015
Assets:
TL	$	642,668		$	656,491
LTL	333,490			330,203
Global Solutions	316,027			317,453
Corporate	7,073			8,057
Eliminations⁽¹⁾	(1,176		)	(4,451		)
Total	$	1,298,082		$	1,307,753

(1) Eliminations represents intercompany trade receivable balances between the three segments.

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13. Restatement of Previously Issued Financial Statements

In November 2016, the Company commenced an internal investigation into certain accounting discrepancies at its Morgan Southern and Bruenger operating companies. Subsequently, an independent internal investigation was undertaken by the Audit Committee of the Board of Directors (the “Audit Committee”), with assistance from outside counsel and outside consultants to provide forensic and investigative support (the “Audit Committee Investigation”). The expanded Audit Committee Investigation included detailed reviews of financial records at other operating companies and at the Company's corporate headquarters. The Audit Committee Investigation identified material accounting errors that impacted substantially all financial statement line items and disclosures.

On January 27, 2017, the Audit Committee, as a result of the information obtained in connection with the ongoing internal investigation and after considering the recommendation of management, determined that previously issued (1) consolidated financial statements as of December 31, 2015 and 2014, and for the three years in the period ended December 31, 2015; (2) unaudited condensed consolidated financial statements for the quarterly periods in the years ended December 31, 2015 and 2014; and (3) the unaudited condensed consolidated financial statements for the quarterly periods ended March 31, 2016, June 30, 2016, and September 30, 2016, should no longer be relied upon due to the identification of material accounting errors.

Based on the Audit Committee Investigation, current management determined that there were deficiencies in the design and/or execution of internal controls that constituted material weaknesses. Current management determined that structural and environmental factors, including the increased size and complexity arising from the acquisition of 25 non-public companies between February 2011 and September 2015, the inconsistency of the Company's accounting systems, policies and procedures, and management override of internal controls contributed to the material weaknesses and resulting material accounting errors. The Company's internal controls failed to prevent or were overridden by management in certain instances to allow recording accounting entries without appropriate support, recording accounting entries that were inconsistent with information known by management at the time, not communicating relevant information within the organization and, in some cases, withholding information from the Company's independent directors, Audit Committee, and independent auditors, which resulted in material accounting errors.

Accounting Adjustments

The following is a discussion of the significant accounting adjustments that were made to the Company's previously issued financial statements.

Receivables and Related Reserves

Trade Receivables and Allowance for Doubtful Accounts

The Company identified and corrected certain errors related to its accounting for trade receivables and related allowance for doubtful accounts that were misstated. In its original analysis, the Company did not consider all of the relevant information available with respect to the deteriorated aging and collection information available at the time its condensed consolidated financial statements were previously issued, which resulted in an understatement of the allowance for doubtful accounts and other operating expenses. There were also instances in which a customer's receivables and the corresponding revenue were overstated for shipments that did not occur. Accounts receivable and allowance for doubtful accounts and the corresponding revenue and other operating expenses have been corrected in the restated condensed consolidated financial statements.

The Company also corrected goodwill in the restated condensed consolidated financial statements related to an allowance for doubtful accounts at the acquisition date.

Contractor Receivables and Related Reserves

The Company identified and corrected certain errors related to its accounting for contractor receivables and related reserves recorded as either contra liabilities or other assets. The Company determined gross contractor receivables were understated because amounts were reported as contra liabilities with no right of offset. The Company also noted that contractor receivables were overstated and other operating expenses understated because the Company, in its original analysis, did not consider all of the relevant information available with respect to historical IC turnover or the collectibility of contractor receivables when a driver was no longer contracted by the Company. Contractor receivables and related reserves and the corresponding other operating expenses have been corrected in the restated condensed consolidated financial statements.

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Unrecorded Charges and Contingent Liabilities

Unrecorded Charges

The Company identified and corrected certain errors related to the overstatement of cash and prepaid expenses (including other receivables) and understatement of accounts payable and accrued expenses, which resulted in an understatement of the related other operating expenses. Errors in the cash accounts resulted from certain operating companies failing to complete their bank reconciliations on-time. Errors in the prepaid expense and other current assets, accounts payable, and accrued expense accounts resulted from not amortizing prepaid balances across relevant service periods, not considering collectibility of other receivables (excluding contractor receivables), and not recording expenses in the period incurred. Cash, prepaid expenses and other current assets, accounts payable, and accrued expenses and other current liabilities and the related other operating expenses have been corrected in the restated condensed consolidated financial statements.

The Company determined that it did not properly establish an accrual for contractor or driver payables incurred but not paid at the acquisition date for one of its operating companies. It was also determined that subsequent accruals were also not established, thereby understating purchase transportation costs. Using actual payment data, the Company determined the accrual for its driver and contractor payables at the date of acquisition and at the end of each subsequent period. Additionally, the Company identified discrepancies between how certain operating companies were recording settlement deductions for ICs resulting in an overstatement of purchased transportation costs and an understatement of other operating expenses. The Company corrected purchased transportation costs and other operating expenses in the restated condensed consolidated financial statements.

The Company also corrected goodwill and intangible assets in the restated condensed consolidated financial statements related to an incorrect allocation recorded at the acquisition date.

Lease Purchase Guarantee

The Company identified and corrected errors related to its accounting for the lease purchase guarantees it makes for its IC's that lease tractors from certain leasing companies. The Company previously underestimated the default rate under these leases, which resulted in an understatement of accrued expenses, the corresponding prepaid expense, and other operating expenses in subsequent periods. The Company corrected other operating expenses resulting from subsequent amortization of the prepaid expense and increased accrued expense and other liabilities in the restated condensed consolidated financial statements.

Contingent Purchase Obligations

The Company identified and corrected errors related to its subsequent accounting for contingent purchase obligation reserves related to certain acquisitions. The subsequent adjustments of the contingent purchase obligations were not based on management's best estimate or information available at the time the Company completed its analysis for each period resulting in the misstatement of other operating expenses in particular periods. The Company recorded adjustments to other operating expenses, accrued expenses and other current liabilities, and other long-term liabilities in the restated condensed consolidated financial statements.

Insurance Reserves and Related Receivables

The Company identified and corrected certain errors related to its accounting for insurance reserves. The Company did not consider certain information available at the time its condensed consolidated financial statements were previously issued, resulting in an understatement of accrued expenses and other current liabilities and related other operating expenses. The Company reviewed claims submitted and paid, as well as claims incurred but not reported for auto liability, workers compensation, and short or damaged cargo to estimate the required reserves. The Company corrected accrued expenses and other current liabilities and other operating expenses for the increased insurance reserves in the restated condensed consolidated financial statements.

The Company also recorded receivables from insurers related to some of these claims but over-estimated the amount of the reimbursement, which resulted in an overstatement of prepaid expenses and other current assets and an understatement of other operating expenses. The Company corrected the prepaid expenses and other current assets and other operating expenses in the restated condensed consolidated financial statements.

Capital Improvements and Aircraft Spare Parts

Capital Improvements

The Company identified and corrected errors related to its accounting for capitalized improvements. Specifically, the Company capitalized certain repair and maintenance expenses and other operating expenses that did not extend the useful life of the primary asset. This resulted in an understatement of operating expenses in the period which this occurred and an overstatement of depreciation expense in subsequent periods. Property and equipment and accumulated depreciation and related other operating expenses and depreciation expenses have been corrected in the restated condensed consolidated financial statements.

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Aircraft Spare Parts

The Company identified and corrected certain errors related to its accounting for its spare parts associated with its aircraft fleet, which were previously expensed when purchased as opposed to capitalizing. In connection with the restatement, the Company determined that the cost of the spare parts for its aircraft was material at the acquisition date and should have been capitalized. The Company corrected its accounting policy accordingly. The Company recorded the capitalization of spare parts for aircraft, which increased property and equipment and decreased other operating expenses as the spare parts were purchased. The Company recorded increases to depreciation and amortization in subsequent periods. The Company also increased property and equipment and reduced goodwill to capitalize the spare parts on-hand at acquisition

Income Taxes and Debt Reclassification

Income Taxes

The Company reviewed the tax impact of the above mentioned restatement adjustments and has recorded the tax effects of these adjustments to taxes receivable, deferred tax assets and liabilities, and provision for income taxes as appropriate. Tax adjustments reflect the nature and timing of the specific accounting adjustments and the ability to amend federal and state income tax returns for tax periods beginning after December 31, 2012. Changes to the Company's effective tax rate are primarily the result of changes to contingent purchase obligations on non-taxable transactions.

Debt Reclassification

As discussed in Note 5, after considering the effects of the restatement adjustments, the Company was not in compliance with its debt covenants and as such, reclassified all of its debt to current.

Impact on Condensed Consolidated Statements of Operations

The net effect of the restatement described above on the Company's previously issued condensed consolidated statements of operations for the three month periods ended March 31, 2016 and 2015 is as follows (in thousands, except per share):



	Three Months Ended March 31, 2016
	As Previously Reported		Receivables & Related Reserves		Unrecorded Charges & Contingent Liabilities			Insurance Reserves & Related Receivables			Capital Improvements & Aircraft Spare Parts			Income Taxes & Debt Reclassification			As Restated
Revenues	$	465,632	$	1,914	$	(1,000	)	$	—		$	—		$	—		$	466,546
Operating expenses:
Purchased transportation costs	308,474		—		(435		)	—			—			—			308,039
Personnel and related benefits	67,601		—		748			—			—			—			68,349
Other operating expenses	69,415		553		34			1,279			2,592			—			73,873
Depreciation and amortization	9,536		—		—			—			(327		)	—			9,209
Total operating expenses	455,026		553		347			1,279			2,265			—			459,470
Operating income	10,606		1,361		(1,347		)	(1,279		)	(2,265		)	—			7,076
Interest expense	5,608		—		—			—			—			—			5,608
Income before provision for income taxes	4,998		1,361		(1,347		)	(1,279		)	(2,265		)	—			1,468
Provision for income taxes	1,933		—		—			—			—			(1,365		)	568
Net income	$	3,065	$	1,361	$	(1,347	)	$	(1,279	)	$	(2,265	)	$	1,365		$	900
Earnings per share:
Basic	$	0.08															$	0.02
Diluted	$	0.08															$	0.02
Weighted average common stock outstanding:
Basic	38,284																38,284
Diluted	38,372																38,372

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	Three Months Ended March 31, 2015
	As Previously Reported		Receivables & Related Reserves			Unrecorded Charges & Contingent Liabilities			Insurance Reserves & Related Receivables			Capital Improvements & Aircraft Spare Parts			Income Taxes & Debt Reclassification			As Restated
Revenues	$	488,970	$	(136	)	$	—		$	—		$	—		$	—		$	488,834
Operating expenses:
Purchased transportation costs	328,491		—			(1,114		)	—			—			—			327,377
Personnel and related benefits	62,055		—			909			—			—			—			62,964
Other operating expenses	64,745		1,979			2,032			1,373			1,083			—			71,212
Depreciation and amortization	6,877		—			—			—			(70		)	—			6,807
Total operating expenses	462,168		1,979			1,827			1,373			1,013			—			468,360
Operating income	26,802		(2,115		)	(1,827		)	(1,373		)	(1,013		)	—			20,474
Interest expense	4,609		—			—			—			—			—			4,609
Income before provision for income taxes	22,193		(2,115		)	(1,827		)	(1,373		)	(1,013		)	—			15,865
Provision for income taxes	8,589		—			—			—			—			(2,544		)	6,045
Net income	$	13,604	$	(2,115	)	$	(1,827	)	$	(1,373	)	$	(1,013	)	$	2,544		$	9,820
Earnings per share:
Basic	$	0.36																$	0.26
Diluted	$	0.35																$	0.25
Weighted average common stock outstanding:
Basic ⁽¹⁾	38,011																	38,011
Diluted ⁽¹⁾	39,341																	39,324

⁽¹⁾ As restated amounts for basic and diluted weighted average common stock outstanding have been corrected for a computational error identified.

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Impact on Condensed Consolidated Balance Sheets

The net effect of the restatement described above on the Company's previously issued condensed consolidated balance sheets as of March 31, 2016 and December 31, 2015 is as follows (in thousands):



	March 31, 2016
	As Previously Reported		Receivables & Related Reserves			Unrecorded Charges & Contingent Liabilities			Insurance Reserves & Related Receivables			Capital Improvements & Aircraft Spare Parts			Income Taxes & Debt Reclassification			As Restated
ASSETS
Current assets:
Cash and cash equivalents	$	8,064	$	—		$	(1,196	)	$	—		$	—		$	—		$	6,868
Accounts receivable	268,441		(9,644		)				—			—			—			258,797
Deferred income taxes	4,323		—			—			—			—			16,015			20,338
Income tax receivable	10,523		—			—			—			—			10,766			21,289
Prepaid expenses and other current assets	49,819		(1,277		)	(11,692		)	(2,642		)	(1,804		)	—			32,404
Total current assets	341,170		(10,921		)	(12,888		)	(2,642		)	(1,804		)	26,781			339,696
Property and equipment	197,353		—			302			—			(4,115		)	—			193,540
Other assets:
Goodwill	691,687		(2,136		)	(530		)				(9,626		)	3,984			683,379
Intangible assets, net	74,547		—			(1,000		)	—			—			—			73,547
Other noncurrent assets	5,828		(230		)	2,157			—			165			—			7,920
Total other assets	772,062		(2,366		)	627			—			(9,461		)	3,984			764,846
Total assets	$	1,310,585	$	(13,287	)	$	(11,959	)	$	(2,642	)	$	(15,380	)	$	30,765		$	1,298,082
LIABILITIES AND STOCKHOLDERS’ INVESTMENT
Current liabilities:
Current maturities of debt	$	15,000	$	—		$	—		$	—		$	—		$	401,110		$	416,110
Accounts payable	111,362		10,970			2,910			—			—			—			125,242
Accrued expenses and other current liabilities	47,729		420			12,548			18,686			—			108			79,491
Total current liabilities	174,091		11,390			15,458			18,686			—			401,218			620,843
Long-term debt, net of current maturities	401,110		—			—			—			—			(401,110		)	—
Long-term deferred tax liabilities	104,767		—			—			—			—			688			105,455
Other long-term liabilities	14,113		—			200			—			—			—			14,313
Total liabilities	694,081		11,390			15,658			18,686			—			796			740,611
Commitments and contingencies (Note 10)
Stockholders’ investment:
Common stock	383		—			—			—			—			—			383
Additional paid-in capital	397,385		—			—			—			—			—			397,385
Retained earnings	218,736		(24,677		)	(27,617		)	(21,328		)	(15,380		)	29,969			159,703
Total stockholders’ investment	616,504		(24,677		)	(27,617		)	(21,328		)	(15,380		)	29,969			557,471
Total liabilities and stockholders’ investment	$	1,310,585	$	(13,287	)	$	(11,959	)	$	(2,642	)	$	(15,380	)	$	30,765		$	1,298,082

⁽¹⁾ As previously reported balances have been revised to separate taxes receivable from prepaid expenses and other current assets and long-term deferred tax liabilities from other long-term liabilities.

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	December 31, 2015
	As Previously Reported		Receivables & Related Reserves			Unrecorded Charges & Contingent Liabilities			Insurance Reserves & Related Receivables			Capital Improvements & Aircraft Spare Parts			Income Taxes & Debt Reclassification			As Restated
ASSETS
Current assets:
Cash and cash equivalents	$	8,664	$	—		$	(734	)	$	—		$	—		$	—		$	7,930
Accounts receivable	272,176		(12,147		)	—			—			—			—			260,029
Deferred income taxes	4,876		—			—			—			—			16,015			20,891
Income tax receivable	11,262		—			—			—			—			9,401			20,663
Prepaid expenses and other current assets	50,839		(112		)	(10,464		)	(2,405		)	(807		)	—			37,051
Total current assets	347,817		(12,259		)	(11,198		)	(2,405		)	(807		)	25,416			346,564
Property and equipment	197,744		—			302			—			(2,682		)	—			195,364
Other assets:
Goodwill	691,118		(2,136		)	(530		)	—			(9,626		)	3,984			682,810
Intangible assets, net	76,694		—			(1,000		)	—			—			—			75,694
Other noncurrent assets	6,183		(230		)	1,368			—			—			—			7,321
Total other assets	773,995		(2,366		)	(162		)	—			(9,626		)	3,984			765,825
Total assets	$	1,319,556	$	(14,625	)	$	(11,058	)	$	(2,405	)	$	(13,115	)	$	29,400		$	1,307,753
LIABILITIES AND STOCKHOLDERS’ INVESTMENT
Current liabilities:
Current maturities of debt	$	15,000	$	—		$	—		$	—		$	—		$	417,830		$	432,830
Accounts payable	104,357		11,125			684			—			—			—			116,166
Accrued expenses and other current liabilities	48,657		288			15,225			17,644			—			108			81,922
Total current liabilities	168,014		11,413			15,909			17,644			—			417,938			630,918
Long-term debt, net of current maturities	417,830		—			—			—			—			(417,830		)	—
Long-term deferred tax liabilities	104,400		—			—			—			—			688			105,088
Other long-term liabilities	16,005		—			(697		)	—			—			—			15,308
Total liabilities	706,249		11,413			15,212			17,644			—			796			751,314
Commitments and contingencies (Note 10)
Stockholders’ investment:
Common stock	383		—			—			—			—			—			383
Additional paid-in capital	397,253		—			—			—			—			—			397,253
Retained earnings	215,671		(26,038		)	(26,270		)	(20,049		)	(13,115		)	28,604			158,803
Total stockholders’ investment	613,307		(26,038		)	(26,270		)	(20,049		)	(13,115		)	28,604			556,439
Total liabilities and stockholders’ investment	$	1,319,556	$	(14,625	)	$	(11,058	)	$	(2,405	)	$	(13,115	)	$	29,400		$	1,307,753

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Impact on Condensed Consolidated Statements of Cash Flows

The net effect of the restatement described above on the Company's previously issued condensed consolidated statements of cash flows for the three months ended March 31, 2016 and 2015 is as follows (in thousands):



	Three Months Ended March 31, 2016
	As Previously Reported			Adjustments			As Restated
Cash flows from operating activities:
Net income	$	3,065		$	(2,165	)	$	900
Depreciation and amortization	10,215			(329		)	9,886
Loss on disposal of property and equipment	261			235			496
Provision for bad debts	337			427			764
Deferred tax provision	367			—			367
Share-based compensation	549			—			549
Tax deficiency on share-based compensation	253			—			253
Changes in:
Accounts receivable	3,398			(2,930		)	468
Income tax receivable	—			(626		)	(626		)
Prepaid expenses and other assets	1,647			1,934			3,581
Accounts payable	7,005			2,071			9,076
Accrued expenses and other liabilities	(1,671		)	(570		)	(2,241		)
Net cash provided by operating activities	25,426			(1,953		)	23,473
Cash flows from investing activities:
Capital expenditures	(7,574		)	1,527			(6,047		)
Proceeds from sale of property and equipment	213			—			213
Net cash used in investing activities	(7,361		)	1,527			(5,834		)
Cash flows from financing activities:
Net cash used in financing activities	(18,665		)	(36		)	(18,701		)
Net decrease in cash and cash equivalents	(600		)	(462		)	(1,062		)
Cash and cash equivalents:
Beginning of period	8,664			(734		)	7,930
End of period	$	8,064		$	(1,196	)	$	6,868

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	Three Months Ended March 31, 2015
	As Previously Reported			Adjustments			As Restated
Cash flows from operating activities:
Net income	$	13,604		$	(3,784	)	$	9,820
Depreciation and amortization	7,395			(70		)	7,325
Loss on disposal of property and equipment	109			182			291
Provision for bad debts	612			597			1,209
Deferred tax provision	607			—			607
Share-based compensation	796			—			796
Adjustment to contingent purchase obligations	—			(244		)	(244		)
Excess tax benefit on share-based compensation	(811		)	—			(811		)
Changes in:
Accounts receivable	(3,858		)	113			(3,745		)
Income tax receivable	—			(1,506		)	(1,506		)
Prepaid expenses and other assets	(1,109		)	1,268			159
Accounts payable	(11,292		)	752			(10,540		)
Accrued expenses and other liabilities	6,231			1,774			8,005
Net cash provided by operating activities	12,284			(918		)	11,366
Cash flows from investing activities:
Capital expenditures	(15,833		)	901			(14,932		)
Proceeds from sale of property and equipment	522						522
Net cash used in investing activities	(15,311		)	901			(14,410		)
Cash flows from financing activities:
Net cash provided by financing activities	3,666			(23		)	3,643
Net increase in cash and cash equivalents	639			(40		)	599
Cash and cash equivalents:
Beginning of period	11,345			(536		)	10,809
End of period	$	11,984		$	(576	)	$	11,408

14. Subsequent Events

Following the Company's press release on January 30, 2017, three putative class actions were filed in the United States District Court for the Eastern District of Wisconsin on behalf of a class of persons who acquired common stock of the Company between May 8, 2014 and January 30, 2017, inclusive. The Complaints allege that the Company, Mark A. DiBlasi, and Peter R. Armbruster violated Section 10(b) of the Exchange Act, and Messrs. DiBlasi and Armbruster violated Section 20(a) of the Exchange Act, by making materially false or misleading statements, or failing to disclose material facts, regarding the Company's internal control over financial reporting and financial statements. The Complaints seek certification as a class action, compensatory damages, and attorney’s fees and costs. On May 19, 2017, the Court consolidated the actions under the caption In re Roadrunner Transportation Systems, Inc. Securities Litigation, and appointed Public Employees’ Retirement System as lead plaintiff. Counsel for lead plaintiff has advised the Company of their intent to file a consolidated Amended Complaint after the Company issues its restated financial statements.

On May 25, 2017, Richard Flanagan filed a complaint alleging derivative claims on the Company's behalf in the Circuit Court of Milwaukee County, State of Wisconsin (Case No. 17-cv-004401) against Scott Rued, Mark DiBlasi, Christopher Doerr, John Kennedy, III, Brian Murray, James Staley, Curtis Stoelting, William Urkiel, Judith Vijums, Michael Ward, Chad Utrup, Ivor Evans, Peter Armbruster, and Brian van Helden. Count I of the Complaint alleges the Director Defendants breached their fiduciary duties by “knowingly failing to ensure that the Company implemented and maintained adequate internal controls over its accounting and financial reporting functions,” and seeks unspecified damages. Count II of the Complaint alleges the Officer Defendants DiBlasi, Armbruster, and van Helden received substantial performance-based compensation and bonuses for fiscal year 2014 that should be disgorged. The action has been stayed by agreement pending a decision on an anticipated motion to dismiss the Amended Complaint to be filed in the securities class action described above.

On June 28, 2017, Jesse Kent filed a complaint alleging derivative claims on the Company's behalf and class action claims in the United States District Court for the Eastern District of Wisconsin (Case No. 17-cv-00893-PP) against Scott Rued, Mark DiBlasi, Christopher Doerr, John Kennedy, III, Brian Murray, James Staley, Curtis Stoelting, William Urkiel, Judith Vijums,

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Michael Ward, Chad Utrup, Ivor Evans, Peter Armbruster, Brian van Helden, Scott Dobak, and Ralph Kittle. Count I of the complaint alleges the Individual Defendants other than Armbruster, Dobak, Evans, Kittle, and van Helden, violated Section 14(a) of the Exchange Act by making false and misleading statements in proxies concerning the Company's financial statements and internal controls. Count II of the Complaint alleges: (i) all the Individual Defendants breached their fiduciary duties of good faith, candor, and loyalty by creating a culture of lawlessness; (ii) the Officer Defendants knew, were reckless, or were grossly negligent in not knowing that the Company lacked effective internal controls and the financial statements were inaccurate; (iii) the Director Defendants other than Dobak and Kittle breached their duty of loyalty by recklessly permitting the improper statements concerning the Company's internal controls and financial statements; (iv) the Director Defendants other than Dobak and Kittle breached their fiduciary duty and committed the ultra vires act of appointing the interlocking director defendant Dobak to the Company's Board of Directors in violation of Section 8 of the Clayton Act; and (v) the Audit Committee Defendants breached their fiduciary duty of loyalty by approving the statements concerning the Company's internal controls and financial statements. Count III of the Complaint alleges all the Individual Defendants wasted corporate assets by: (i) spending hundreds of millions of dollars to purchase various companies in connection with its alleged reckless growth-through-acquisition strategy; (ii) forcing the Company to have to defend itself in the securities fraud lawsuits; and (iii) paying improper compensation and bonuses to certain of the executive officers and directors who breached their fiduciary duty. Count IV of the Complaint alleges all the Individual Defendants were unjustly enriched as a result of the compensation and director remuneration they received while breaching their fiduciary duties. Count V of the Complaint alleges a direct claim against the current directors based on the Company's failure to hold an annual meeting of stockholders by June 18, 2017 (13 months after its previous annual meeting of stockholders). The Complaint seeks judgment awarding unspecified damages, directing the Company to make certain corporate governance changes, awarding restitution, ordering disgorgement, directing the Company to hold its annual meeting of stockholders, and directing the Board of Directors to remove Dobak from the Board. On September 29, 2017, all the Defendants filed a motion to dismiss the complaint. The motion is being held in abeyance pending the Company filing its restated consolidated financial statements.

On December 22, 2017, Chester County Employees Retirement Fund filed a Complaint alleging derivative claims on the Company's behalf in the United States District Court for the Eastern District of Wisconsin (Case No. 2:17-cv-01788-NJ) against the same defendants as those named in the Kent action. The allegations are substantially the same as those in the Kent Complaint.

In addition, subsequent to the announcement that certain previously filed financial statements should not be relied upon, the Company was contacted by the SEC, FINRA, and the Department of Justice. The Department of Justice and Division of Enforcement of the SEC have commenced investigations into the events giving rise to the restatement. The Company has received formal requests for documents and other information. The Company is cooperating fully with all of these agencies.

The Company is unable to estimate the costs associated with the above matters at this time.



ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Management's Discussion and Analysis has been revised for the effects of the restatement disclosed in Note 13 “Restatement of Previously Issued Financial Statements” of this Form 10-Q/A. You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our unaudited condensed consolidated financial statements and the related notes and other financial information included in this Quarterly Report on Form 10-Q/A. This discussion and analysis contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those identified below, and those discussed in the section titled “Risk Factors” included in this Quarterly Report on Form 10-Q/A and our Annual Report on Form 10-K/A for the year ended December 31, 2015. This discussion and analysis should also be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” relating to our results for the year ended December 31, 2015, set forth in our Annual Report on Form 10-K/A for the year ended December 31, 2015.

Overview

We are a leading asset-light transportation and logistics service provider offering a comprehensive suite of global supply chain solutions, including truckload logistics, customized and expedited less-than-truckload, intermodal solutions (transporting a shipment by more than one mode, primarily via rail and truck), freight consolidation, inventory management, expedited services, air freight, international freight forwarding, customs brokerage, and transportation management solutions. We utilize a broad third-party network of transportation providers, comprised of ICs and purchased power providers, to serve a diverse customer base in terms of end-market focus and annual freight expenditures.

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We have three segments:

Truckload Logistics. Within our TL business, we arrange the pickup and delivery of truckload, intermodal and ground and air expedited freight through our network of 48 TL service centers, 24 company dispatch offices, and over 100 independent brokerage agents located throughout the United States, Mexico, and Canada. We offer temperature-controlled, dry van, intermodal drayage, and flatbed services and specialize in the transport of automotive parts, refrigerated foods, poultry, and beverages. Our on-demand ground and air expedited services feature proprietary bid technology supported by our fleets of ground and air assets. We believe this array of services and specialization provides our customers with full-service options and provides us with more consistent shipping volumes in any given year.

Less-than-Truckload. Our LTL business involves the pickup, consolidation, linehaul, deconsolidation, and delivery of LTL shipments throughout the United States and into Mexico, Puerto Rico, and Canada. With a network of 47 LTL service centers and over 150 third-party delivery agents, we employ a point-to-point LTL model that we believe serves as a competitive advantage over the traditional hub and spoke LTL model in terms of a balance of competitive pricing and transit times, lower incidence of damage, and reduced fuel consumption.

Global Solutions. Within our Global Solutions business, we offer a full portfolio of domestic and international transportation and logistics solution, including access to cost-effective and time-sensitive modes of transportation within our broad network. Specifically, our Global Solutions offering includes pricing, contract management, transportation mode and carrier selection, freight tracking, freight bill payment and audit, cost reporting and analysis, dispatch, and freight consolidation and warehousing. Our customized Global Solutions offering is designed to allow our customers to reduce operating costs, redirect resources to core competencies, improve supply chain efficiency, and enhance customer service. Our Global Solutions business also includes domestic and international air and ocean transportation services and customs brokerage.

Our success principally depends on our ability to generate revenues through our network of sales personnel, proprietary bid technology, and independent brokerage agents and to deliver freight in all modes safely, on time, and cost-effectively through a suite of solutions tailored to the needs of each customer. Customer shipping demand, over-the-road freight tonnage levels, events leading to expedited shipping requirements, and equipment capacity ultimately drive increases or decreases in our revenues. Our ability to operate profitably and generate cash is also impacted by purchased transportation costs, fuel costs, pricing dynamics, customer mix, and our ability to manage costs effectively. Within our TL business, we typically charge a flat rate negotiated on each load hauled. Within our LTL business, we typically generate revenues by charging our customers a rate based on shipment weight, distance hauled, and commodity type. This amount is typically comprised of a base rate, a fuel surcharge, and any applicable service fees. Within our Global Solutions business, we typically charge a variable rate on each shipment, in addition to transaction or service fees appropriate for the solution we have provided to meet a specific customer’s needs.

We incur costs that are directly related to the transportation of freight, including purchased transportation costs. We also incur indirect costs associated with the transportation of freight that include other operating costs, such as insurance, claims, and commission expenses. In addition, we incur personnel–related costs and other operating expenses, collectively discussed herein as other operating expenses, essential to administering our operations. We continually monitor all components of our cost structure and establish annual budgets, which are generally used to benchmark costs incurred on a monthly basis.

Purchased transportation costs within our TL business are generally based on negotiated rates for each load hauled. Purchased transportation costs within our LTL business represent amounts we pay to ICs or purchased power providers and are generally contractually agreed-upon rates. Within our Global Solutions business, purchased transportation costs include payments made to our purchased power providers, which are generally contractually agreed-upon rates. Purchased transportation costs are the largest component of our cost structure. Our purchased transportation costs typically increase or decrease in proportion to revenues.

Our ability to maintain or grow existing tonnage levels is impacted by overall economic conditions, shipping demand, and over-the-road freight capacity in North America, as well as by our ability to compete effectively in terms of pricing, safety, and on-time delivery.

The pricing environment in the transportation industry also impacts our operating performance. Pricing within our TL business is typically driven by shipment frequency and consistency, length of haul, and customer and geographic mix, but generally has fewer influential factors than pricing within our LTL business. Within our LTL business, we typically generate revenues by charging our customers a rate based on shipment weight, distance hauled, and commodity type. This amount is comprised of a base rate, a fuel surcharge, and any applicable service fees. Our LTL pricing is typically measured by billed revenue per hundredweight, which is often referred to as “yield.” Our LTL pricing is dictated primarily by factors such as shipment size, shipment frequency and consistency, length of haul, freight density, and customer and geographic mix. Within our Global Solutions business, we typically charge a variable rate on each shipment in addition to transaction or service fees appropriate for the solution we have provided to meet a specific customer’s needs. Since we offer both LTL and TL shipping as part of our Global Solutions offering, pricing within our Global Solutions segment is impacted by similar factors. The pricing environment for all of our

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operations generally becomes more competitive during periods of lower industry tonnage levels and increased capacity within the over-the-road freight sector. In addition, when we provide international freight forwarding services in our Global Solutions business, we also contract with airlines, ocean carriers, and agents as needed. The international markets are very dynamic and we must therefore adjust rates regularly based on market conditions.

The transportation industry is dependent upon the availability of adequate fuel supplies and the price of fuel. Fuel prices have fluctuated dramatically over recent years. Within our TL and Global Solutions businesses, we pass fuel costs through to our customers. As a result, our operating income in these businesses is less impacted by changes in fuel prices. Within our LTL business, our ICs and purchased power providers pass along the cost of diesel fuel to us, and we in turn attempt to pass along some or all of these costs to our customers through fuel surcharge revenue programs. Although revenues from fuel surcharges generally offset increases in fuel costs, other operating costs have been, and may continue to be, impacted by fluctuating fuel prices. The total impact of higher energy prices on other nonfuel-related expenses is difficult to ascertain. We cannot predict future fuel price fluctuations, the impact of higher energy prices on other cost elements, recoverability of higher fuel costs through fuel surcharges, and the effect of fuel surcharges on our overall rate structure or the total price that we will receive from our customers. Depending on the changes in the fuel rates and the impact on costs in other fuel- and energy-related areas, our operating margins could be impacted.

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Results of Operations

The following table sets forth, for the periods indicated, summary TL, LTL, Global Solutions, corporate, and consolidated statement of operations data. Such revenue data for our TL, LTL, and Global Solutions segments are expressed as a percentage of consolidated revenues. Other statement of operations data for our TL, LTL, and Global Solutions segments are expressed as a percentage of segment revenues. Corporate and total statement of operations data are expressed as a percentage of consolidated revenues. In 2016, we realigned two of our operating companies into different segments. The change in segments did not have any impact on the consolidated financial statements. Segment data for the three months ended March 31, 2015 has been retrospectively revised to reflect the change in segments.



	Three Months Ended
	March 31,
	2016 ⁽¹⁾					2015 ⁽¹⁾
	(In thousands, except for %’s)
	$			% of Revenues		$			% of Revenues
Revenues:
TL	$	273,344		58.6	%	$	271,859		55.6	%
LTL	114,353			24.5	%	131,645			26.9	%
Global Solutions	83,378			17.9	%	92,746			19.0	%
Eliminations	(4,529		)	(1.0	)%	(7,416		)	(1.5	)%
Total	466,546			100.0	%	488,834			100.0	%
Purchased transportation costs:
TL	176,391			64.5	%	178,295			65.6	%
LTL	79,761			69.7	%	90,294			68.6	%
Global Solutions	56,416			67.7	%	66,204			71.4	%
Eliminations	(4,529		)	(1.0	)%	(7,416		)	(1.5	)%
Total	308,039			66.0	%	327,377			67.0	%
Other operating expenses ⁽²⁾:
TL	86,413			31.6	%	75,672			27.8	%
LTL	31,978			28.0	%	32,882			25.0	%
Global Solutions	18,336			22.0	%	19,296			20.8	%
Corporate	5,495			1.2	%	6,326			1.3	%
Total	142,222			30.5	%	134,176			27.4	%
Depreciation and amortization:
TL	6,742			2.5	%	4,494			1.7	%
LTL	869			0.8	%	727			0.6	%
Global Solutions	1,222			1.5	%	1,276			1.4	%
Corporate	376			0.1	%	310			0.1	%
Total	9,209			2.0	%	6,807			1.4	%
Operating income:
TL	3,798			1.4	%	13,398			4.9	%
LTL	1,745			1.5	%	7,742			5.9	%
Global Solutions	7,404			8.9	%	5,970			6.4	%
Corporate	(5,871		)	(1.3	)%	(6,636		)	(1.4	)%
Total	7,076			1.5	%	20,474			4.2	%
Interest expense	5,608			1.2	%	4,609			0.9	%
Income before provision for income taxes	1,468			0.3	%	15,865			3.2	%
Provision for income taxes	568			0.1	%	6,045			1.2	%
Net income	$	900		0.2	%	$	9,820		2.0	%

(1) See Note 13 “Restatement of Previously Issued Financial Statements.”

(2) Reflects the sum of personnel and related benefits, other operating expenses, and acquisition transaction expenses.

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Three Months Ended March 31, 2016 Compared to Three Months Ended March 31, 2015

Revenues

Consolidated revenues decreased by $22.3 million, or 4.6%, to $466.5 million during the first quarter of 2016 from $488.8 million during the first quarter of 2015, primarily due to the decrease in fuel surcharge revenue and the decline in freight volumes across most end markets, net of new business.

TL revenues increased $1.4 million, or 0.5%, to $273.3 million during the first quarter of 2016 from $271.9 million during the first quarter of 2015. The 2015 acquisition of Stagecoach increased revenue by $9.0 million, which was offset by decreased revenue at our other operating companies.

LTL revenues decreased by $17.2 million, or 13.1%, to $114.4 million during the first quarter of 2016 from $131.6 million during the first quarter of 2015. LTL revenues were impacted by softening customer demand, a drop in fuel prices that resulted in a $6.6 million, or 37.9%, decrease in fuel surcharge revenue, and a 13.8% reduction in tonnage primarily due to changes in freight mix. These decreases were partially offset by a 3.2% increase in revenue per hundredweight excluding fuel from the prior year due to improved pricing and positive freight mix changes resulting from our pricing initiatives.

Global Solutions revenues decreased by $9.3 million, or 10.1%, to $83.4 million during the first quarter of 2016 from $92.7 million during the first quarter of 2015, primarily due to lower volumes and rates in the international freight forwarding and domestic freight management businesses, partially offset by increases of $1.3 million in our warehousing and consolidation business.

Purchased Transportation Costs

Consolidated purchased transportation costs decreased by $19.4 million, or 5.9%, to $308.0 million during the first quarter of 2016 from $327.4 million during the first quarter of 2015.

TL purchased transportation costs decreased by $1.9 million, or 1.1%, to $176.4 million during the first quarter of 2016 from $178.3 million during the first quarter of 2015. TL purchased transportation costs as a percentage of TL revenues decreased to 64.5% during the first quarter of 2016 from 65.6% during the first quarter of 2015.

LTL purchased transportation costs decreased by $10.5 million, or 11.7%, to $79.8 million during the first quarter of 2016 from $90.3 million during the first quarter of 2015, and increased as a percentage of LTL revenues to 69.7% during the first quarter of 2016 from 68.6% during the first quarter of 2015. The decreases were consistent with the decreases in revenue, excluding fuel surcharge, and primarily the result of softening customer demand. Excluding fuel surcharges, our average linehaul cost per mile remained steady at $1.25 during the first quarter of 2016 compared to the first quarter of 2015.

Global Solutions purchased transportation costs decreased by $9.8 million, or 14.8%, to $56.4 million during the first quarter of 2016 from $66.2 million during the first quarter of 2015, and decreased as a percentage of Global Solutions revenues to 67.7% during the first quarter of 2016 from 71.4% during the first quarter of 2015. The decreases were primarily due to the lower volumes and rates in the international freight forwarding and domestic freight management business.

Other Operating Expenses

Consolidated other operating expenses, which reflect the sum of personnel and related benefits, other operating expenses, and acquisition transaction expenses shown in our unaudited condensed consolidated statements of operations, increased by $8.0 million, or 6.0%, to $142.2 million during the first quarter of 2016 from $134.2 million during the first quarter of 2015.

Within our TL business, other operating expenses increased by $10.7 million, or 14.2%, to $86.4 million during the first quarter of 2016 from $75.7 million during the first quarter of 2015, primarily the result of our acquisition of Stagecoach, which accounted for $7.2 million of the increase, increased equipment lease and maintenance costs of $3.5 million, increased insurance and claims expense of $2.7 million, and increased employee driver costs of $0.7 million. These charges were partially offset by decreased other administrative costs of $3.0 million. As a percentage of TL revenues, other operating expenses increased to 31.6% during the first quarter of 2016 from 27.8% during the first quarter of 2015.

Within our LTL business, other operating expenses decreased by $0.9 million, or 2.7%, to $32.0 million during the first quarter of 2016 from $32.9 million during the first quarter of 2015. As a percentage of LTL revenues, other operating expenses increased to 28.0% during the first quarter of 2016 from 25.0% during the first quarter of 2015.

Within our Global Solutions business, other operating expenses decreased by $1.0 million, or 5.0%, to $18.3 million during the first quarter of 2016 from $19.3 million during the first quarter of 2015, primarily due to decreased salaries and benefits of $1.1 million. As a percentage of Global Solutions revenues, other operating expenses increased to 22.0% during the first quarter of 2016 from 20.8% during the first quarter of 2015.

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Other operating expenses that were not allocated to our TL, LTL, or Global Solutions businesses decreased to $5.5 million during the first quarter of 2016 from $6.3 million during the first quarter of 2015.

Depreciation and Amortization

Consolidated depreciation and amortization increased to $9.2 million during the first quarter of 2016 from $6.8 million during the first quarter of 2015, reflecting increases in property and equipment attributable to our acquisitions and our growth and productivity initiatives.

Operating Income

Consolidated operating income was $7.1 million during the first quarter of 2016 compared with $20.5 million during the first quarter of 2015. As a percentage of revenues, operating income decreased to 1.5% during the first quarter of 2016 from 4.2% during the first quarter of 2015.

Within our TL business, operating income decreased by $9.6 million, or 71.7%, to $3.8 million during the first quarter of 2016 from $13.4 million during the first quarter of 2015. As a percentage of TL revenues, operating income decreased to 1.4% during the first quarter of 2016 from 4.9% during the first quarter of 2015.

Within our LTL business, operating income decreased by $6.0 million, or 77.5%, to $1.7 million during the first quarter of 2016 from $7.7 million during the first quarter of 2015. As a percentage of LTL revenues, operating income decreased to 1.5% during the first quarter of 2016 from 5.9% during the first quarter of 2015, primarily as a result of the factors above.

Within our Global Solutions business, operating income increased by $1.4 million, or 24.0%, to $7.4 million during the first quarter of 2016 from $6.0 million during the first quarter of 2015. As a percentage of Global Solutions revenues, operating income increased to 8.9% during the first quarter of 2016 from 6.4% during the first quarter of 2015, primarily as a result of the factors above.

Interest Expense

Interest expense increased to $5.6 million during the first quarter of 2016 from $4.6 million during the first quarter of 2015, primarily as a result of the increased interest rates.

Income Tax

Income tax provision was $0.6 million during the first quarter of 2016 compared to $6.0 million during the first quarter of 2015. The effective tax rate was 38.7% during first quarter of 2016 and 38.1% during the first quarter of 2015. The effective income tax rate varies from the federal statutory rate of 35.0% primarily due to state income taxes as well as the impact of items causing permanent differences.

Net Income

Net income was $0.9 million during the first quarter of 2016 compared to $9.8 million during the first quarter of 2015.

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Liquidity and Capital Resources

Our primary sources of cash have been borrowings under our revolving credit facility, cash flows from operations, and proceeds from the sale of our common stock. Our primary cash needs are and have been to fund normal working capital requirements, repay our indebtedness, finance capital expenditures, and execute our acquisition strategy. As of March 31, 2016, we had $6.9 million in cash and cash equivalents and $249.2 million of availability under our credit facility.

Although we can provide no assurances, amounts available under our revolving credit facility, net cash provided by operating activities, and available cash and cash equivalents should be adequate to finance working capital and planned capital expenditures for at least the next 12 months. Thereafter, we may find it necessary to obtain additional equity or debt financing as we continue to execute our business strategy.

Our credit facility consists of a $300.0 million term loan and a revolving credit facility up to a maximum aggregate amount of $400.0 million, of which up to $10.0 million may be used for Swing Line Loans (as defined in the credit agreement) and up to $40.0 million may be used for letters of credit. The credit facility matures on July 9, 2019.

Advances under our credit facility bear interest at either (a) the Eurocurrency Rate (as defined in the credit agreement), plus an applicable margin in the range of 2.0% to 3.25%, or (b) the Base Rate (as defined in the credit agreement), plus an applicable margin in the range of 1.0% to 2.25%.

Our credit agreement contains certain financial covenants, including a minimum fixed charge coverage ratio and a maximum cash flow leverage ratio. The required maximum cash flow leverage ratio is 3.75 to 1.0 as of March 31, 2016 and decreases to 3.50 to 1.0 as of June 30, 2016. In addition, our credit agreement contains negative covenants limiting, among other things, additional indebtedness, capital expenditures, transactions with affiliates, additional liens, sales of assets, dividends, investments, advances, prepayments of debt, mergers and acquisitions, and other matters customarily restricted in such agreements. After considering the effects of the restatement, as of and during the three months ended March 31, 2016, we were not in compliance with the financial covenants contained in the credit agreement. Our credit agreement also contains customary events of default, including payment defaults, breaches of representations and warranties, covenant defaults, events of bankruptcy and insolvency, failure of any guaranty or security document supporting the credit agreement to be in full force and effect, and a change of control of our business.

Based on our financial forecasts for the second quarter of 2016, we believe there is a risk that we may not be in compliance with our financial covenants as of the end of the second quarter. Although we can provide no assurance, management expects to work with our lenders to either obtain a waiver or modify the current financial covenants.

Cash Flows

A summary of operating, investing, and financing activities are shown in the following table (in thousands):



	Three Months Ended
	March 31,
	2016			2015
Net cash provided by (used in):
Operating activities	$	23,473		$	11,366
Investing activities	(5,834		)	(14,410		)
Financing activities	(18,701		)	3,643
Net change in cash and cash equivalents	$	(1,062	)	$	599

Cash Flows from Operating Activities

Cash provided by operating activities primarily consists of net income adjusted for certain non-cash items, including depreciation and amortization, share-based compensation, provision for bad debts, deferred taxes, and the effect of changes in working capital and other activities.

The difference between our $0.9 million of net income and the $23.5 million of cash provided by operating activities during the three months ended March 31, 2016 was primarily attributable to $9.9 million of depreciation and amortization expense with the remainder attributable to changes in working capital.

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Cash Flows from Investing Activities

Cash used in investing activities was $5.8 million during the three months ended March 31, 2016, which reflects $6.0 million of capital expenditures used to support our operations. This payment was offset by the proceeds from the sale of property and equipment of $0.2 million.

Cash Flows from Financing Activities

Cash used in financing activities was $18.7 million during the three months ended March 31, 2016, which primarily reflects net reduction of borrowings of $17.4 million and the reduction of capital lease obligation of $0.9 million.

Critical Accounting Policies and Estimates

In preparing our condensed consolidated financial statements, we applied the same critical accounting policies as described in our Annual Report on Form 10-K/A for the year ended December 31, 2015 that affect judgments and estimates of amounts recorded for certain assets, liabilities, revenues, and expenses.



ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Commodity Risk

Our primary market risk centers on fluctuations in fuel prices, which can affect our profitability. Diesel fuel prices fluctuate significantly due to economic, political, and other factors beyond our control. Our ICs and purchased power providers pass along the cost of diesel fuel to us, and we in turn attempt to pass along some or all of these costs to our customers through fuel surcharge revenue programs. There can be no assurance that our fuel surcharge revenue programs will be effective in the future. Market pressures may limit our ability to pass along our fuel surcharges.

Interest Rate Risk

We have exposure to changes in interest rates on our revolving credit facility and term loan. The interest rate on our revolving credit facility and term loan fluctuate based on the prime rate or LIBOR plus an applicable margin. Assuming our $400.0 million revolving credit facility was fully drawn and taking into consideration the outstanding term loan of $292.5 million as of March 31, 2016, a 1.0% increase in the borrowing rate would increase our annual interest expense by $6.9 million. We do not use derivative financial instruments for speculative trading purposes and are not engaged in any interest rate swap agreements.



ITEM 4.	CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

In connection with the May 10, 2016 filing of our Quarterly Report on Form 10-Q for the quarter ended March 31, 2016, our prior Chief Executive Officer and Chief Financial Officer concluded that, as of March 31, 2016 (the “Evaluation Date”), our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (“Exchange Act”)) were effective. In connection with the Audit Committee Investigation and management's review of financial records, an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures was performed under the supervision and with the participation of our management, including our current CEO (who is also currently serving as the Principal Financial Officer and Principal Accounting Officer). As a result of this evaluation, our current CEO concluded that our disclosure controls and procedures were not effective as of the Evaluation Date because of the material weaknesses in internal controls identified in Amendment No. 1 on Form 10-K/A for the year ended December 31, 2015, as filed concurrently with this Form 10-Q/A.

Changes in Internal Control Over Financial Reporting

Except for the identification of the material weaknesses, there were no changes during the quarter ended March 31, 2016 in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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Inherent Limitations on Effectiveness of Controls

Management, including our current CEO, does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues, misstatements, errors, and instances of fraud, if any, within our organization have been or will be prevented or detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Controls also can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of controls effectiveness to future periods are subject to risks. Over time, internal controls may become inadequate as a result of changes in conditions, or through the deterioration of the degree of compliance with policies or procedures.

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PART II – OTHER INFORMATION



ITEM 1.	LEGAL PROCEEDINGS.

In the ordinary course of business, we are a defendant in several legal proceedings arising out of the conduct of our business. These proceedings include claims for property damage or personal injury incurred in connection with our services. Although there can be no assurance as to the ultimate disposition of these proceedings, we do not believe, based upon the information available at this time, that these property damage or personal injury claims, in the aggregate, will have a material impact on our consolidated financial statements. We maintain liability insurance coverage for claims in excess of $500,000 per occurrence and cargo coverage for claims in excess of $100,000 per occurrence. We believe we have adequate insurance to cover losses in excess of the deductible amount. As of March 31, 2016 and December 31, 2015, we had reserves for estimated uninsured losses of $23.0 million and $25.9 million, respectively.

In addition to the legal proceedings described above, like many others in the transportation services industry, we are a defendant in five purported class-action lawsuits in California alleging violations of various California labor laws and one purported class-action lawsuit in Illinois alleging violations of the Illinois Wage Payment and Collection Act. The plaintiffs in each of these lawsuits seek to recover unspecified monetary damages and other items. In addition, the California Division of Labor Standards and Enforcement has brought administrative actions against us on behalf of seven individuals alleging that we violated California labor laws. Given the early stage of all of the proceedings described in this paragraph, we are not able to assess with certainty the outcome of these proceedings or the amount or range of potential damages or future payments associated with these proceedings at this time. We believe we have meritorious defenses to these actions and intend to defend these proceedings vigorously. However, any legal proceeding is subject to inherent uncertainties, and we cannot assure that the expenses associated with defending these actions or their resolution will not have a material adverse effect on our business, operating results, or financial condition.

Following our press release on January 30, 2017, three putative class actions were filed in the United States District Court for the Eastern District of Wisconsin on behalf of a class of persons who acquired our common stock between May 8, 2014 and January 30, 2017, inclusive. The Complaints allege that we, Mark A. DiBlasi, and Peter R. Armbruster violated Section 10(b) of the Securities Exchange Act of 1934, and Messrs. DiBlasi and Armbruster violated Section 20(a) of the Exchange Act, by making materially false or misleading statements, or failing to disclose material facts, regarding our internal control over financial reporting and our financial statements. The complaints seek certification as a class action, compensatory damages, and attorney’s fees and costs. On May 19, 2017, the Court consolidated the actions under the caption In re Roadrunner Transportation Systems, Inc. Securities Litigation, and appointed Public Employees’ Retirement System as lead plaintiff. Counsel for lead plaintiff has advised us of their intent to file a consolidated Amended Complaint after we issue our restated financial statements.

On May 25, 2017, Richard Flanagan filed a complaint alleging derivative claims on our behalf in the Circuit Court of Milwaukee County, State of Wisconsin (Case No. 17-cv-004401) against Scott Rued, Mark DiBlasi, Christopher Doerr, John Kennedy, III, Brian Murray, James Staley, Curtis Stoelting, William Urkiel, Judith Vijums, Michael Ward, Chad Utrup, Ivor Evans, Peter Armbruster, and Brian van Helden. Count I of the Complaint alleges the Director Defendants breached their fiduciary duties by “knowingly failing to ensure that the Company implemented and maintained adequate internal controls over its accounting and financial reporting functions,” and seeks unspecified damages. Count II of the Complaint alleges the Officer Defendants DiBlasi, Armbruster, and van Helden received substantial performance-based compensation and bonuses for fiscal year 2014 that should be disgorged. The action has been stayed by agreement pending a decision on an anticipated motion to dismiss the Amended Complaint to be filed in the securities class action described above.

On June 28, 2017, Jesse Kent filed a complaint alleging derivative claims on our behalf and class action claims in the United States District Court for the Eastern District of Wisconsin (Case No. 17-cv-00893-PP) against Scott Rued, Mark DiBlasi, Christopher Doerr, John Kennedy, III, Brian Murray, James Staley, Curtis Stoelting, William Urkiel, Judith Vijums, Michael Ward, Chad Utrup, Ivor Evans, Peter Armbruster, Brian van Helden, Scott Dobak, and Ralph Kittle. Count I of the Complaint alleges the Individual Defendants other than Armbruster, Dobak, Evans, Kittle, and van Helden, violated Section 14(a) of the Exchange Act by making false and misleading statements in proxies concerning the Company's financial statements and internal controls. Count II of the Complaint alleges: (i) all the Individual Defendants breached their fiduciary duties of good faith, candor, and loyalty by creating a culture of lawlessness; (ii) the Officer Defendants knew, were reckless, or were grossly negligent in not knowing that the Company lacked effective internal controls and its financial statements were inaccurate; (iii) the Director Defendants other than Dobak and Kittle breached their duty of loyalty by recklessly permitting the improper statements concerning the Company's internal controls and financial statements; (iv) the Director Defendants other than Dobak and Kittle breached their fiduciary duty and committed the ultra vires act of appointing the interlocking director defendant Dobak to the Board in violation of Section 8 of the Clayton Act; and (v) the Audit Committee Defendants breached their fiduciary duty of loyalty by approving the statements concerning the Company's internal controls and financial statements. Count III of the Complaint alleges all the Individual Defendants wasted corporate assets by: (i) spending hundreds of millions of dollars to purchase various companies in connection with its alleged reckless growth-through-acquisition strategy; (ii) forcing the Company to have to defend itself in the

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securities fraud lawsuits; and (iii) paying improper compensation and bonuses to certain of the Company's executive officers and directors who breached their fiduciary duty. Count IV of the Complaint alleges all the Individual Defendants were unjustly enriched as a result of the compensation and director remuneration they received while breaching their fiduciary duties. Count V of the Complaint alleges a direct claim against the current directors based on the Company's failure to hold an annual meeting of stockholders by June 18, 2017 (13 months after its previous annual meeting of stockholders). The Complaint seeks judgment awarding unspecified damages, directing the Company to make certain corporate governance changes, awarding restitution, ordering disgorgement, directing the Company to hold its annual meeting of stockholders, and directing the Board to remove Dobak from the Board. On September 29, 2017, all the Defendants filed a motion to dismiss the complaint. The motion is being held in abeyance pending the filing of our restated consolidated financial statements.

On December 22, 2017, Chester County Employees Retirement Fund filed a Complaint alleging derivative claims on our behalf in the United States District Court for the Eastern District of Wisconsin (Case No. 2:17-cv-01788-NJ) against the same defendants as those named in the Kent action. The allegations are substantially the same as those in the Kent Complaint.

In addition, subsequent to our announcement that certain previously filed financial statements should not be relied upon, we were contacted by the SEC, FINRA, and the Department of Justice. The Department of Justice and Division of Enforcement of the SEC have commenced investigations into the events giving rise to the restatement. We have received formal requests for documents and other information. We are cooperating fully with all of these agencies.



ITEM 1A.	RISK FACTORS.

An investment in our common stock involves a high degree of risk. You should carefully consider the factors described in our Annual Report on Form 10-K/A for the year ended December 31, 2015 in analyzing an investment in our common stock. If any such risks occur, our business, financial condition, and results of operations would likely suffer, the trading price of our common stock would decline, and you could lose all or part of the money you paid for our common stock. In addition, the risk factors and uncertainties could cause our actual results to differ materially from those projected in our forward-looking statements, whether made in this report or other documents we file with the SEC, or our annual report to stockholders, future press releases, or orally, whether in presentations, responses to questions, or otherwise.

There have been no material changes to the Risk Factors described under “Part I - Item 1A. Risk Factors” in our Annual Report on Form 10-K/A for the year ended December 31, 2015.



ITEM 6.	EXHIBITS



Exhibit Number		Exhibit


10.29		Employment Agreement, dated January 18, 2016 by and between the Registrant and Curtis W. Stoelting (1)

10.30		Form of Stock Option Agreement (1)

31.1		Certification of Principal Executive Officer and Principal Financial Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a)

32.1		Section 1350 Certification of Principal Executive Officer and Principal Financial Officer

101.INS		XBRL Instance Document

101.SCH		XBRL Taxonomy Extension Schema Document

101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF		XBRL Taxonomy Extension Definition Linkbase Document

101.LAB		XBRL Taxonomy Extension Label Linkbase Document

101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

(1) Incorporated by reference to the Registrant's Quarterly Report on Form 10-Q filed with the SEC on May 10, 2016.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



		ROADRUNNER TRANSPORTATION SYSTEMS, INC.

Date: January 30, 2018	By:	/s/ Curtis W. Stoelting
		Curtis W. Stoelting
		Chief Executive Officer (Principal Executive Officer, Principal Financial Officer, and Principal Accounting Officer )

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