An internal investigation into roll-up transportation and logistics provider Roadrunner Transportation Systems’ financial reports has concluded that its 10-K SEC statements dating back to 2014 overstated earnings by between $20 million and $25 million.
Roadrunner Transportation Systems, Inc. of Cudahy, Wis. has uncovered some potentially costly errors in its financial accounting dating back to the full year in 2014, according to a statement from the company.
An internal investigation into the roll-up transportation and logistics provider’s financial reports that began in November 2016 has concluded that several of its 10-K and 10-Q statements to the U.S. Securities and Exchange Commission (SEC) are unreliable and may have overstated earnings by as much as $25 million. Roadrunner specifically identified the following financial statements and associated reports and press releases as affected by the errors:
• Audited consolidated financial statements and unaudited quarterly information included in Roadrunner’s Annual Report on Form 10-K for the year ended Dec. 31, 2014;
• Unaudited condensed consolidated financial statements included in Roadrunner’s Quarterly Reports on Form 10-Q for the quarters ended March 31, 2014, June 30, 2014, and Sept. 30, 2014;
• Audited consolidated financial statements and unaudited quarterly information included in Roadrunner’s Annual Report on Form 10-K for the year ended Dec. 31, 2015;
• Unaudited condensed consolidated financial statements included in Roadrunner’s Quarterly Reports on Form 10-Q for the quarters ended March 31, 2015, June 30, 2015, and Sept. 30, 2015;
• And Unaudited condensed consolidated financial statements included in Roadrunner’s Quarterly Reports on Form 10-Q for the quarters ended March 31, 2016, June 30, 2016 and Sept. 30, 2016.
The errors relate primarily to unrecorded expenses from unreconciled balance sheet accounts including cash, driver and other receivables, and linehaul and other driver payables at Roadrunner’s Morgan Southern and Bruenger operating subsidiaries, both of which were acquired in 2011.
Although the investigation is still ongoing, the company has identified various accounting errors it currently estimates will require prior period adjustments to Roadrunner’s results of operations of between $20 million and $25 million. Roadrunner noted that the amounts of the discrepancies, as well as which prior periods were affected, are still subject to change as a result of the continuing investigation.
Investment firm Stifel immediately suspended its rating on the company’s stock, saying in a client advisory note, “Roadrunner just came out and said you can’t trust any of its audited financial statements from the 2014 10-K to present. For that reason, we no longer have a reasonable basis for producing estimates or valuing the company and are suspending our rating on the shares.
“Roll-ups are messy, and roll-ups without a coherent strategy or competent integration team are even worse, as evidenced here,” it added, referring to Roadrunner’s asset-light acquisition strategy. “The future of this company is likely selling off pieces to pay back its lenders, in our view.”
In conjunction with the investigation, Roadrunner is also reassessing its internal financial reporting and compliance controls.
“We expect the investigation to broaden into all divisions and the investigators to comb through all acquisitions,” said Stifel. “Maybe Morgan Southern and Bruenger were the only ones that slipped through the cracks, but we believe there will likely be more accounting errors found. In the meantime, we also expect the company to find a new CFO.”
Roadrunner said the company intends to amend its previously filed 2015 annual report and its quarterly reports for the first three quarters of 2016 “as soon as practicable,” but did not provide an estimated date for filings.
“We want our stockholders to know that providing confidence and transparency in our financial statements is of paramount importance, and we are doing everything possible to ensure that these errors do not occur in the future,” CEO Mark DiBlasi said in a statement.
Roadrunner uncovers costly accounting errors
