Celadon Group acknowledges investigation by SEC

Indianapolis-based Celadon Group Inc. on Monday confirmed something that has been speculated for months: The trucking company is under investigation by the U.S. Securities and Exchange Commission.

“The SEC has undertaken a formal investigation related to the company,” Celadon wrote in a written statement issued Monday morning. “The company has received a subpoena from the SEC and is in the process of producing documents pursuant to the subpoena.”

Celadon shares were down nearly 9 percent Monday after the announcement, to $6.15 each.

The disclosure was part of a larger announcement in which Celadon provided updates on a host of topics related to its turnaround strategy, including financial, structural and personnel updates. The company said it was continuing to restructure its assets and recently landed a $22.6 million loan to help with that effort.

Monday's announcement did not specify what the SEC is investigating, nor does the company say when the investigation began. But the disclosure marks the first time Celadon has publicly acknowledged the existence of an investigation that some investors and analysts started talking about early this year.

In April, a Celadon investor filed a civil suit against the company, alleging that the company was misleading shareholders about its financial status and covering up the fact that it was under SEC investigation. That case is still making its way through the system in U.S. District Court in the Southern District of New York.

At that time, Celadon’s then-President and CEO Paul Will told IBJ that the SEC had not notified the company that it was under investigation and that he was unaware of any probe of the company. Will left Celadon as CEO in July and was replaced by Paul C. Svindland.

Contacted by IBJ, Celadon spokesman Joe Weigel said both Svindland and President/Chief Operating Officer Jon Russell were traveling and unavailable for comment Monday morning about the nature or timing of the investigation. 

The SEC declined to comment Monday morning.

Celadon has been working through several significant financial challenges in recent months and and included several other updates about those efforts.
 
In May, Celadon said it expected to post a $10 million loss for the quarter that ended in March, in large part because of its irregular route operations.

At that time the company also disclosed that its most recent annual financial report, and those for the two subsequent quarters, should not be relied upon because of questions raised by auditor BKD LLP.

In that annual report, which covers the fiscal year ending June 30, 2016, the firm reported profit of $24.8 million on $1.07 billion in revenue. Celadon has not yet released amended versions of those reports. On Monday, Celadon said it does not expect to issue these reports before Dec. 31.

Other updates:

— Celadon expects to exit its Quality Companies lease servicing business, along with two other of its “small businesses” which are not named.

Celadon said it has had identified excess trailers and real estate that it plans to sell. Celadon has already done some trimming: In September, it exited its flatbed trucking business and its driver-training school, which had locations in Indianapolis, Texas and Virginia.

— The company is actively searching for senior management and independent director candidates. “We expect to add both in the relatively near term,” the company said.

— On Friday, Celadon completed an amendment of its revolving credit facility led by Bank of America N.A. Details about the amendment weren't disclosed.

— On Sept. 22, Celadon received a $22.6 million equipment term loan that it will use to reduce the outstanding balance on its revolving credit facility and for additional liquidity during the refinancing process.