Celadon Continues Downsizing Moves
Indianapolis-based Celadon Group Inc. (NYSE: CGI) says it is has refinanced its revolving credit facility and decreased its truck count by hundreds of tractors. The moves come weeks after the company sold its flatbed trucking division and exited its three Celadon Driving Academy locations.
Celadon Chief Executive Officer Paul Svindland says the company is "moving rapidly toward implementation" of a new strategic plan by refinancing, increasing liquidity and extending the term of equipment leases set to mature next fiscal year. He says the company is also reducing its tractor count after "the fleet size grew too rapidly" over the past several years. Svindland says Celadon cut its truck count by 200 between April and August, and another 200 in September.
In a release, Celadon also revealed it is being investigated by the Securities and Exchange Commission. The company did not give details of the investigation, but says shareholder class action and derivative lawsuits are seeking damages "related to certain accounting-related matters."
Svindland's statement is below:
Chief Executive Officer, Paul Svindland, commented: "Over the past two months, Celadon has adopted a new strategic plan and is moving rapidly toward implementation. The primary components of our plan include strengthening our capital structure, exiting or downsizing unprofitable or non-core business, restoring the historical operating practices and profitability of our irregular route truckload business, and augmenting our senior management team and board of directors with world-class talent. We are making significant progress toward our goals, while acknowledging our financial results will be uneven during this time.
"Strengthening our capital structure involves refinancing our revolving credit facility, increasing our liquidity, and extending the term of equipment leases maturing during fiscal 2018. The refinancing effort is underway and has received significant initial interest, while our major equipment lessors have been supportive as well. We expect to identify lead investors and a proposed capital structure in November, with a closing targeted for the second half of December. We appreciate the support of our revolving lenders and our existing tractor and trailer lessors during this process.
"Our business evaluation identified core businesses for investment as well as non-core assets and business units for disposition. The core truckload business, Celadon Logistics, A&S/Kinard, Taylor, Buckler, International, and others are key components of our ongoing strategy. In terms of non-core assets, we exited the flatbed business and our driver-training academy in September, and we plan to exit three additional small businesses, including our Quality Companies lease servicing business, in coming quarters. In addition, excess trailers and real estate have been identified for sale.
"The turnaround plan in our irregular route truckload business is centered around allocating our significant asset capacity toward profitable, driver friendly, and enduring customer needs within defined operating territories. Over the past several years, the fleet size grew too rapidly and our traffic lanes became too diffuse in our Celadon Truckload Services subsidiary ("CTSI"), the largest irregular route component of our business. Our plan includes rationalizing the fleet size and improving our asset productivity. We expect the strong freight market and growing shipper demand for capacity to assist us in increasing yield, driving out unproductive miles, and improving the efficiency of CTSI's operations. Since Jon Russell and Doug Schmidt took over CTSI's truckload operations, average revenue per seated tractor per week (excluding fuel surcharge revenue) improved from $2,652 in April to $3,069 in August. At the same time, total truck count decreased by approximately 200 tractors, or 7%, between April and August, and by approximately another 200 tractors in September including the previously announced disposition of the flatbed operation.
"Finally, we are taking steps to augment our team. We have searches underway for both senior management and independent director candidates. We expect to add both in the relatively near term."