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Organization, Nature of Business and Significant Accounting Policies (Policies)
12 Months Ended
Dec. 31, 2019
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Nature of Business
Nature of Business
Roadrunner Transportation Systems, Inc. (the “Company”) is headquartered in Downers Grove, Illinois with operations primarily in the United States and was organized into the following four segments effective April 1, 2019: Ascent Transportation Management (“Ascent TM”), Ascent On-Demand (“Ascent OD”), Less-than-Truckload (“LTL”) and Truckload (“TL”). Within its Ascent TM segment, the Company provides third-party domestic freight management, international freight forwarding, customs brokerage and retail consolidation solutions. Within its Ascent OD segment, the Company provides premium mission critical air and ground expedite and logistics operations. Within its LTL segment, the Company's services involve the pickup, consolidation, linehaul, deconsolidation, and delivery of LTL shipments. Within its TL segment, the Company provides the following services: scheduled and expedited dry van truckload, temperature controlled truckload and other warehousing operations.
Principles of Consolidation
Principles of Consolidation
The accompanying audited consolidated financial statements have been prepared pursuant to the rules and regulations of the United States Securities and Exchange Commission (“SEC”). All intercompany balances and transactions have been eliminated in consolidation.
The Company owns 37.5% of Central Minnesota Logistics, Inc. (“CML”), which operates as one of the Company's brokerage agents. CML is accounted for under the equity method and is insignificant to the consolidated financial statements. The Company records its investment in CML in other noncurrent assets and recognizes its share of the net income or loss of CML.
Reverse Stock Split
Reverse Stock Split
On April 4, 2019, the Company filed with the Secretary of State of the State of Delaware a Certificate of Amendment to its Amended and Restated Certificate of Incorporation (the “Certificate of Amendment”), to effect a reverse stock split (the “Reverse Stock Split”), as described in its Definitive Information Statement on Schedule 14C filed with the SEC on March 15, 2019. As a result, the Reverse Stock Split took effect on April 4, 2019 and the Company’s common stock began trading on a split-adjusted basis when the market opened on April 5, 2019.
Pursuant to the Reverse Stock Split, shares of the Company’s common stock were automatically consolidated at the rate of 1-for-25 without any further action on the part of the Company’s stockholders. All fractional shares owned by each stockholder were aggregated and to the extent after aggregating all fractional shares any stockholder was entitled to a fraction of a share, such stockholder became entitled to receive, in lieu of the issuance of such fractional share, a cash payment based on a pre-split cash rate of $0.4235, which is the volume weighted average trading price per share on the New York Stock Exchange (“NYSE”) for the five consecutive trading days immediately preceding April 4, 2019.
Following the Reverse Stock Split, the number of outstanding shares of the Company’s common stock was reduced by a factor of 25 to approximately 37,561,532. The number of authorized shares of common stock was also reduced by a factor of 25 to 44,000,000.
All references to numbers of common shares and per common share data in these consolidated financial statements and related notes have been retroactively adjusted to account for the effect of the Reverse Stock Split for all periods presented.
Change in Accounting Principle
Change in Accounting Principle
On January 1, 2019, the Company adopted Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842) (“ASU 2016-02”). The Company elected to adopt Topic 842 using an optional alternative method of adoption, referred to as the “Comparatives Under ASC 840 Approach,” which allows companies to apply the new requirements to only those leases that existed as of January 1, 2019. Under the Comparatives ASC 840 Approach, the date of initial application is January 1, 2019 with no retrospective restatements. As such, there was no impact to historical comparative income statements and the balance sheet assets and liabilities have been recognized in 2019 in accordance with ASC 842. Upon adoption, the Company recognized a lease liability, initially measured at the present value of the lease payments, of $135 million with a corresponding right-of-use asset for operating leases. The Company's accounting for finance leases is essentially unchanged. As part of its adoption of Topic 842 the Company elected the “package of three” practical expedient, which, among other things, does not require the Company to reassess lease classification for expired or existing contracts upon adoption. The Company also elected to not use hindsight in assessing existing lease terms at the transition date. Lessees can also make an accounting policy election to not recognize an asset and liability for leases with a term of twelve months or less, which the Company elected. The Company also elected the practical expedient to treat lease and non-lease components as a single lease component.
On January 1, 2018, the Company adopted Accounting Standards Update (“ASU”) No. 2014-09, which was updated in August 2015 by ASU 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 Financial Accounting Standards Board (“FASB”) issued ASU 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 arrange 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.
The Company determined key factors from the five-step process to recognize revenue as prescribed by the new standard that may be applicable to each of the Company's operating businesses that roll up into its four segments. Significant customers and contracts from each business unit were identified and the Company reviewed these contracts. The Company completed the evaluation of the provisions of these contracts and compared the historical accounting policies and practices to the requirements of the new standard including the related qualitative disclosures regarding the potential impact of the effects of the accounting policies and a comparison to the Company's previous revenue recognition policies.
The Company determined that certain transactions with customers required a change in the timing of when revenue and related expense is recognized. The guidance was applied only to contracts that were not completed at the date of initial adoption. The Company elected the modified retrospective method which required a cumulative adjustment to retained earnings instead of retrospectively adjusting prior periods. The Company recorded a $0.9 million benefit to opening retained earnings as of January 1, 2018 for the cumulative impact of adoption related to the recognition of in-transit revenue. Results for 2019 and 2018 are presented under Topic 606, while prior periods were not adjusted. The adoption of Topic 606 did not have a material impact on the Company's consolidated financial statements for the year ended December 31, 2018. The disclosure requirements of Topic 606 are included within the Company's revenue recognition accounting policy below.
Segment Reporting
Segment Reporting
The Company determines its segments based on the information utilized by the chief operating decision maker, the Company’s Chief Executive Officer (“CODM”), to allocate resources and assess performance. Based on this information, the Company has determined that it has four segments: Ascent TM, Ascent OD, LTL and TL. The Company changed its segment reporting effective April 1, 2019 when the CODM began assessing performance of the Ascent OD air and ground expedite business, separately from its truckload business. Segment information for prior periods have been revised to align with the new segment structure.
Use of Estimates
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 at 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.
Cash and Cash Equivalents
Cash and Cash Equivalents
Cash equivalents are defined as short-term investments that have an original maturity of three months or less at the date of purchase and are readily convertible into cash. The Company maintains cash in several banks and, at times, the balances may exceed federally insured limits.
Account Receivable and Related Reserves
Accounts Receivable and Related Reserves
Accounts receivable represent trade receivables from customers and are stated net of an allowance for doubtful accounts of approximately $8.3 million and $10.0 million as of December 31, 2019 and 2018, respectively. Management estimates the portion of accounts receivable that will not be collected and accounts are written off when they are determined to be uncollectible. Accounts receivable are uncollateralized and are generally due 30 to 60 days from the invoice date.
Property and Equipment
Property and Equipment
Property and equipment are stated at cost. Maintenance and repair costs are charged to expense as incurred. For financial reporting purposes, depreciation is calculated using the straight-line method over the following estimated useful lives:
 
Buildings and leasehold improvements
5-40 years
Computer equipment
3-5 years
Internal use software
3-10 years
Office equipment, furniture, and fixtures
3-10 years
Dock, warehouse, and other equipment
3-10 years
Tractors and trailers
3-15 years
Aircraft fleet and spare parts
2-10 years

Leasehold improvements are amortized over the shorter of their useful lives or the remaining lease term. Accelerated depreciation methods are used for tax reporting purposes.
Property and equipment and other long-lived assets are reviewed periodically for possible impairment. The Company evaluates whether current facts or circumstances indicate that the carrying value of the assets to be held and used may not be recoverable. If such circumstances are determined to exist, an estimate of undiscounted future cash flows produced by the long-lived asset, or the appropriate grouping of assets, is compared to the carrying value to determine whether impairment exists. If an asset is determined to be impaired, the loss is measured and recorded based on quoted market prices in active markets, if available. If quoted market prices are not available, the estimate of fair value is based on various valuation techniques, including discounted value of estimated future cash flows. The Company reports an asset to be disposed of at the lower of its carrying value or its fair value less the cost to sell.
Costs incurred to develop software for internal use are capitalized and amortized over the estimated useful life of the software. Costs related to maintenance of internal-use software are expensed as incurred.
Spare Parts for Aircraft Fleet
Spare parts for aircraft fleet are categorized into several categories: rotables, repairables, expendables, and materials and supplies. Rotable and repairable spare parts for aircraft fleet are typically significant in value, can be repaired and re-used, and generally have an expected useful life consistent with the aircraft fleet these parts support. Rotables and repairables for aircraft fleet are recorded at cost and depreciated over the lesser of the life of the aircraft or spare part. The cost of repairing these aircraft fleet parts is expensed as incurred. Expendables and materials and supplies are expensed when purchased.
Goodwill and Other Intangibles
Goodwill and Other Intangibles
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 on July 1st 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 the Company to compare the estimated fair value of each of its reporting units to its carrying amount, including goodwill. If the carrying amount of the reporting unit exceeds the estimated fair value of the reporting unit, a non-cash goodwill impairment loss is recognized as an impairment charge for the amount by which the carrying amount exceeds the reporting unit's fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit.
For purposes of the impairment analysis, the fair value of the Company’s reporting units is estimated based upon an average of the market approach and the income approach, both of which incorporate numerous assumptions and estimates such as company forecasts, discount rates, and growth rates, among others. The determination of the fair value of the reporting units requires the Company to make significant estimates and assumptions. These estimates and assumptions primarily include, but are not limited to, the selection of appropriate peer group companies, control premiums appropriate for acquisitions in the industries in which the Company competes, the discount rate, terminal growth rates, and forecasts of revenue, operating income, and capital expenditures. The allocation requires several analyses to determine fair value of assets and liabilities including, among others, customer relationships and property and equipment. Although the Company believes its estimates of fair value are reasonable, actual financial results could differ from those estimates due to the inherent uncertainty involved in making such estimates. Changes in assumptions concerning future financial results or other underlying assumptions could have a significant impact on either the fair value of the reporting units, the amount of the goodwill impairment charge, or both. Future declines in the overall market value of the Company's stock may also result in a conclusion that the fair value of one or more reporting units has declined below its carrying value.
Intangible assets consist primarily of definite lived customer relationships. The customer relationships intangible assets are amortized over their estimated five to 12-year useful lives. The Company evaluates its intangible assets for impairment when current facts or circumstances indicate that the carrying value of the assets to be held and used may not be recoverable. See Note 4, “Goodwill and Intangible Assets” to the consolidated financial statements for additional information.
Fair Value of Financial Instruments
Fair Value Measurement
The estimated fair value of the Company's debt approximated its carrying value as of December 31, 2019 and 2018 as the debt facilities as of such dates bore interest based on prevailing variable market rates and as such were categorized as a Level 2 in the fair value hierarchy as defined in Note 8, “Fair Value Measurement” to the consolidated financial statements.
The Company has elected to measure the value of its preferred stock using the fair value method. The fair value of the preferred stock is the estimated amount that would be paid to redeem the liability in an orderly transaction between market participants at the measurement date. The significant inputs used to determine the fair value are unobservable and require significant management judgment or estimation and as such were categorized as a Level 3 in the fair value hierarchy.
Issuance Costs
Issuance Costs
Debt issuance costs represent costs incurred in connection with the issuance of the Company's debt. Issuance costs associated with the Company's debt are capitalized and amortized over the expected maturity of the financing agreements using the effective interest rate method. Unamortized debt issuance costs have been classified as a reduction to debt in the consolidated balance sheets.
Issuance costs incurred in connection with the issuance of the Company's preferred stock have been expensed as incurred and are reflected in interest expense - preferred stock.
Share-Based Compensation
Share-Based Compensation
The Company’s share-based payment awards are comprised of stock options, restricted stock units, and performance restricted stock units.  The cost for the Company’s stock options is measured at fair value using the Black-Scholes option pricing model.  The cost for the performance restricted stock units is measured at fair value using the Monte Carlo method.  The cost for restricted stock units is measured using the stock price at the grant date.  The cost is recognized over the vesting period of the award, which is typically between three and four years.
Income Taxes
Income Taxes
The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, the Company determines deferred tax assets and liabilities on the basis of the differences between the financial statement and tax bases of assets and liabilities by using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date. The U.S. federal tax rate reduction from 35% to 21% (pursuant to the Tax Cuts and Jobs Act enacted on December 22, 2017) was recognized in the benefit from income taxes in 2017.
The Company recognizes deferred tax assets to the extent that it believes that these assets are more likely than not to be realized. In making such a determination, the Company generally considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. Given the Company's recent operating losses, projected future taxable income and tax-planning strategies cannot be considered as sources of future taxable income. A valuation allowance has been established related to deferred tax assets that will not “more likely than not” be realized in the future. If the Company determines that it would be able to realize its deferred tax assets in the future in excess of their net recorded amount, the Company would make an adjustment to the deferred tax asset valuation allowance, which would reduce the provision for income taxes.
The Company records uncertain tax positions in accordance with ASC 740 on the basis of a two-step process in which (1) the Company determines whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position, and (2) for those tax positions that meet the more-likely-than-not recognition threshold, the Company recognizes the largest amount of tax benefit that is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority.
Revenue Recognition
Revenue Recognition
The Company’s revenues are primarily derived from transportation services which includes providing freight and carrier services both domestically and internationally via land, air, and sea. The Company disaggregates revenue among its four segments, Ascent TM, Ascent OD, LTL and TL as presented in Note 16 “Segment Reporting” to the consolidated financial statements.
Performance Obligations - A performance obligation is a promise in a contract to transfer a distinct good or service to the customer, and is the basis of revenue recognition, in accordance with GAAP. A performance obligation is created once a customer agreement with an agreed upon transaction price exists. The terms and conditions of the Company’s agreements with customers are generally consistent within each segment. The transaction price is typically fixed and determinable and is not contingent upon the occurrence or non-occurrence of any other event. The transaction price is generally due 30 to 60 days from the date of invoice. The Company’s transportation service is a promise to move freight to a customer’s destination, with the transit period typically being less than one week. The Company views the transportation services it provides to its customers as a single performance obligation. This performance obligation is satisfied and recognized in revenue over the requisite transit period as the customer’s goods move from origin to destination. The Company determines the period to recognize revenue in transit based upon the departure date and the delivery date, which may be estimated if delivery has not occurred as of the reporting date. Determining the transit period and the percentage of completion as of the reporting date requires management to make judgments that affect the timing of revenue recognized. The Company has determined that revenue recognition over the transit period provides a reasonable estimate of the transfer of goods and services to its customers as the Company’s obligation is performed over the transit period.
Principal vs. Agent Considerations - The Company utilizes independent contractors and third-party carriers in the performance of some transportation services. The Company evaluates whether its performance obligation is a promise to transfer services to the customer (as the principal) or to arrange for services to be provided by another party (as the agent) using a control model. This evaluation determined that the Company is in control of establishing the transaction price, managing all aspects of the shipments process and taking the risk of loss for delivery, collection, and returns. Based on the Company’s evaluation of the control model, it determined that all of the Company’s major businesses act as the principal rather than the agent within their revenue arrangements and such revenues are reported on a gross basis.
Contract Balances and Costs - The Company applies the practical expedient in Topic 606 that permits the Company to not disclose the aggregate amount of transaction price allocated to performance obligations that are unsatisfied as of the end of the period as the Company's contracts have an expected length of one year or less. The Company also applies the practical expedient in Topic 606 that permits the recognition of incremental costs of obtaining contracts as an expense when incurred if the amortization period of such costs is one year or less. These costs are included in purchased transportation costs.
The Company's performance obligations represent the transaction price allocated to future reporting periods for freight services started but not completed at the reporting date. This includes the unbilled amounts and accrued freight costs for freight shipments in transit. The Company has $10.6 million and $7.8 million of unbilled amounts recorded in accounts receivable and $7.7 million and $6.1 million of accrued freight costs recorded in accounts payable as of December 31, 2019 and December 31, 2018, respectively.
Insurance
Insurance
The Company uses a combination of purchased insurance and self-insurance programs to provide for the cost of auto liability, general liability, cargo damage, workers’ compensation claims, and benefits paid under employee health care programs. Insurance reserves are established for estimates of the loss that the Company will ultimately incur on reported claims, as well as estimates of claims that have been incurred but not yet reported.
The measurement and classification of self-insured costs requires the consideration of historical cost experience, demographic and severity factors, and judgments about the current and expected levels of cost per claim and retention levels. These methods provide estimates of the liability associated with claims incurred as of the balance sheet date, including claims not reported. The Company believes these methods are appropriate for measuring these self-insurance accruals.
Lease Purchase Guarantee
Lease Purchase Guarantee
In connection with leases of certain equipment used exclusively for the Company, the Company has a guarantee to perform in the event of default by the driver. The Company estimates the costs associated with the guarantee by estimating the default rate at the inception of the lease. The Company records the liability and a corresponding asset, which is subsequently amortized over the life of the lease.
Liquidity
Liquidity
The Company’s primary cash needs are and have been to fund its operations, normal working capital requirements, repay its indebtedness, and finance capital expenditures. The Company has taken a number of actions to continue to support its operations and meet its obligations in light of the incurred losses and negative cash flows experienced over the past several years.
The Company completed various financing transactions in 2019, including the February 2019 closing of the $200.0 million ABL Credit Facility and the completion of the $61.1 million Term Loan Credit Facility, both maturing on February 28, 2024. In August 2019, the Company entered into a Fee Letter with entities affiliated with Elliott Management Corporation (“Elliott”) to arrange for Letters of Credit in an aggregate Face Amount of $20.0 million to support the Company's obligations under the ABL Credit Facility. The Face Amount was subsequently increased to $30.0 million later in August 2019 and then to $45.0 million in October 2019. In September 2019, the Company issued Revolving Notes to entities affiliated with Elliott. Pursuant to the Revolving Notes, the Company may borrow from time to time up to $20.0 million from Elliott on a revolving basis. On November 5, 2019, the Company entered into amendments to the ABL Credit Facility and the Term Loan Credit Facility which enabled the Company to enter into the Third Lien Credit Facility with Elliott Associates, L.P. and Elliott International, L.P, as Lenders, and U.S. Bank National Association, as Administrative Agent. The Third Lien Credit Facility allows the Company to request, subject to approval by the Lenders, additional financing up to $100.0 million and matures on August 24, 2026. The Company used the initial $20.0 million Term Loan Commitment under the Third Lien Credit Facility to refinance its Revolving Notes. Additionally, on November 5, 2019, the Company completed the sale of its Roadrunner Intermodal Services business to Universal Logistics Holdings, Inc. for $51.3 million in cash, subject to customary purchase price and working capital adjustments. On December 9, 2019, the Company completed the sale of its Flatbed business unit, for $30.0 million in cash, subject to customary purchase price and working capital adjustments. See Note 6 for the definitions of the capitalized terms used in this paragraph and for further discussion of these financing transactions.
The Company also completed various financing transactions subsequent to the date of the financial statements. On January 28, 2020, the Company, entered into a definitive agreement to sell its subsidiary Prime Distribution Services, Inc. to C.H. Robinson Worldwide, Inc. for $225.0 million, subject to customary purchase price and working capital adjustments. The transaction closed March 2, 2020. On March 2, 2020, the Company repaid in full and terminated the Term Loan Credit Agreement. The Company also repaid all amounts outstanding under the ABL Credit Facility. On March 2, 2020, the Company and its direct and indirect domestic subsidiaries entered into a new ABL credit agreement with BMO Harris Bank N.A., as Administrative Agent, Lender, Letter of Credit Issuer and Swing Line Lender. The new ABL Credit Facility consists of a $50.0 million asset-based revolving line of credit. See Note 16 for the definitions of the capitalized terms used in this paragraph and further discussion of these subsequent events.
New Accounting Pronouncements
New Accounting Pronouncements
In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”).  The amendments in ASU 2016-13 require the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts.  In addition, ASU 2016-13 amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration.  The amendment is effective for public entities for annual reporting periods beginning after December 15, 2019, however early application is permitted for reporting periods beginning after December 15, 2018. The Company adopted ASU 2016-13 on January 1, 2020 and it did not have a material impact on the consolidated financial statements.
In August 2018, the FASB issued ASU 2018-15, Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract, which is effective for the Company in 2020. The amendments in ASU 2018-15 align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal use software license). The accounting for the service element of a hosting arrangement that is a service contract is not affected by these amendments. The Company adopted ASU 2018-15 on January 1, 2020 and it did not have a material impact on the consolidated financial statements.