New CEO Paul Svindland plans a return to core trucking operations
Once revered as one of the top trucking companies in the nation, Celadon Group has hit a rough patch in 2017. First came word that the company’s auditor, BKD, was withdrawing financial statements for fiscal year 2016, which ended on June 30, 2016. Then a lawsuit over those fiscal statements was filed, claiming that by hiding the financial problems, the company misled investors. And then there were changes at the executive level and, pending review of previous financial statements, a hold on quarterly statements for its fiscal third and fourth quarters.
Negative news reports have followed the company throughout the year, perhaps none more damaging than a Seeking Alpha report that stated simply, “CGI will be bankrupt or insolvent within 1-2 quarters.”
While the financial troubles and financial review are still ongoing, Celadon Group has made moves to right its ship and regain its foothold as one of the country’s top carriers.
Jonathon Russell, the former president of Celadon Logistics and the son of company founder Stephen Russell, has taken over as COO, replacing Eric Meek, who, resigned in May. Douglas Schmidt has been promoted to president of Celadon Trucking and is now overseeing the truckload division, and Paul Will, a longtime employee of the company that had worked his way up to CEO, retired and has been replaced by Paul Svindland.
The changes are part of a makeover for the company that is in the early stages. They are being met with great enthusiasm, though.
“[Svindland’s] a tremendous candidate for this role,” John Engstrom, associate analyst of transportation & logistics for Stifel, told FreightWaves last month. “Filling this role takes a very special type of person, and it’s a short list, and he’s on it. We’re very optimistic about the future of Celadon.”
Svindland, though, while facing a host of issues believes Celadon will emerge on the other side a strong and focused carrier.
“We’re going to evaluate every aspect of our business with our ultimate goal to be a best-in-class trucking company,” he tells FreightWaves. “We want drivers to come drive for us. We want employees” to enjoy working for us.
As to the current issues which have Celadon facing a delisting of its stock by the New York Stock Exchange because of its financial statements being pulled by BKD, Svindland can’t say much, only that the company is working to meet a 6-month deadline (it can be extended another 6 months) that expires in October to come into NYSE compliance.
The financial issues stem primarily from the company’s leasing operation, Quality Companies, which leases vehicles to owner-operators and other carriers. In December 2016, Celadon announced it had formally entered into a “joint venture agreement with Element Transportation LLC, a subsidiary of Element Fleet Management.” The joint venture would hold leasing assets managed by Celadon’s Quality Companies business unit and formerly held by a combination of Celadon (including, Element, and 19th Capital Group.
The Seeking Alpha report in May claimed that Celadon used “off-balance sheet transactions involving its JV with Element Fleet Management and related party 19th Capital” and that it “failed to record a $36M estimated loss from Quality equipment sales on its income statement despite its cash flow statement suggesting that such a loss was incurred.”
Again, while unable to speak directly to the problems, Svindland suggests that the company may have gotten away from its core businesses in recent years, particularly with ancillary businesses such as the leasing operation.
“The last few years there’s been a pretty good emphasis on the [leasing business],” he says. “Going forward, there will be less focus on the leasing. We want to be a trucking company, not a leasing company.
“We have some ancillary businesses that we are evaluating,” he adds. “Those businesses will be evaluated and maybe some of those businesses we will get out of.”
It’s all part of Svindland’s plan to move the company back to its trucking roots, and that includes Celadon Logistics, which he says is an important part of making the company run smoothly by allowing the truckload division to shift loads when trucks are not available.
Just last week, Celadon Logistics was named to Inbound Logistics' Top 100 third party logistics (3PL) list for a third year in a row.
Svindland joins Celadon from Farren International Holdings, which is a private-equity backed holding company for multiple trucking companies that was formed from the merger of EZE Trucking, where Svindland served as CEO since April 2014, and Farren International. Svindland took over as chairman & CEO of Farren International Holdings following the merger in 2016.
Prior to EZE Trucking, he served as executive vice president & COO of Pacer International and as managing director of AlixPartners, where he was the co-lead of the group’s Global Transportation & Logistics practice.
Engstrom told FreightWaves that Svindland has “a lot of experience in the industry, he’s well connected and well-respected” and has “done a lot of work turning around [trucking companies].”
Officially on the job July 24, Svindland is still not ready to divulge long-term plans beyond refocusing the company on its trucking operations. He is quick, though, to praise Jonathan Russell, Doug Schmidt, and other members of the Celadon team for the work they are doing in helping achieve that goal.
“When I met with Jon and going through the interview process, it was very important to me that Jon and I saw the whole [situation] the same way,” Svindland says. “Not that we aren’t going to argue…but we need to have the same vision, and we do.”
Svindland notes that he has been “pleasantly pleased” with the talent Celadon possesses, and while employees are operating with the “dark cloud hanging over the company,” it has not affected them or the operations, and any concerns customers have raised have been addressed with that customer.
“There have been some customers that have asked about it, but Jon and I have talked to customers and worked through those concerns,” he says. “As of now, it has not had a material impact on the business.”
Another priority for Svindland is ensuring drivers become a priority, something that had already started to take root before he arrived. Earlier this year, Celadon increased its base pay for drivers in March as part of its “Driver First” initiative.
“Jon and Doug Schmidt have done a tremendous job,” he says. “But making sure drivers are getting the loads that get them the most miles within hours-of-service requirements is important.”
Svindland notes that many of the changes he is now overseeing were started before he arrived, giving credit to the existing management team for those initiatives while also citing transparency as a key factor going forward.
“One of the reasons [Jonathan Russell] and I are going to get along is we both want transparency,” he notes. “You are going to have bad news - it’s okay - but we can [talk about it and get it solved].”
That transparency has trickled down to individual department meetings, which Svindland says he and Russell are willing to and have attended to discuss any issues employees may have.
“Jonathan Russell and I and the entire management team are on the same page and on the same mission,” Svindland concludes, “and that is to get Celadon back to being the best trucking company.”