Celadon Group to restate four years of financial results as accounting issues bite

The financial and accounting problems plaguing truckload and logistics provider Celadon Group Inc. deepened late yesterday when the company disclosed it would be forced to restate four years of financial results due to accounting regularities.

At the same time, the Indianapolis-based company said its stock would be delisted from trading on the New York Stock Exchange because it could not meet a May 2 deadline for bringing its financial reporting schedules current. Trading in Celadon stock was halted after yesterday's close of trading with the stock price at $3.45 a share. The company said it expects its stock to be traded on the Over-the-Counter "Pink" market electronic quotation service, more commonly known as the "Pink Sheets." It said it was unclear when trading would resume.

In yesterday's announcement, Celadon said that it would restate its results going back to fiscal year 2014, and that previously released information covering those periods should not be relied upon. Last May, it disclosed that financial statements over six fiscal quarters from mid-2015 through Dec. 31, 2016, should not be relied upon because of accounting issues over a joint venture involving its truck-leasing division. The month before, Celadon reported a $10 million fiscal third quarter operating loss, which led to the resignation of then-President and COO Eric Meek and the start of a housecleaning and reshuffling at the company's highest management levels.

Yesterday's disclosure detailed a complex series of events that stretched over several years and took 11 months for CFO Thom Albrecht and Chief Accounting Officer Vince Donargo, both relatively new to their jobs, to uncover and unravel. Among the alleged transgressions were undisclosed arrangements in equipment transactions involving its Quality Companies unit that overstated the equipment's value. This and other irregularities will force Celadon to report a $200 million to $250 million reduction in pre-tax net income over a three-year period that ended June 30, 2016, the company acknowledged yesterday.

The downward revisions to net income, along with operating losses and higher expenses since the company last filed a financial statement, will dramatically reduce its shareholders' equity, Celadon admitted. The adjustments are likely to have a material impact on assets, liabilities, revenue, income or loss, and specific expenses recorded over certain periods, the company said.

Paul Svindland, who took over as CEO in July, focused his comments on what he said were operational improvements underway at Celadon. Svindland said the company had reduced its U.S. truckload division's fleet by 20 percent to focus on its most attractive lanes and freight; the division's poor performance was at the heart of the company's unexpected fiscal 2017 third quarter loss that led to Meek's resignation. The company also sold its flatbed division, outsourced its driver school operations, and replaced most of its executive and accounting leadership.

The changes have led to a 20 percent increase in weekly revenue per seated tractor from April 2017 to February 2018, Svindland said. Still, the company has experienced higher costs associated with fleet shrinkage, equipment repositioning, driver recruitment, and on-boarding new customers, he added.

At one time, Celadon was the seventh-largest truckload carrier in the United States. Besides its domestic footprint, it has long held a strong position in the cross-border trade between the U.S, Canada, and Mexico.

Celadon's announcement comes a day after another troubled transport concern, Roadrunner Transportation Systems Inc., reported financial results for the first nine months of 2017 after being forced in early 2017 to restate its 2014, 2015, and 2016 results.