Overdrive Magazine

January 2020

Issue link: https://dmtmag.uberflip.com/i/1197294

Contents of this Issue

Navigation

Page 19 of 51

18 | Overdrive | January 2020 Days after Celadon Group suddenly halted operations in early December, the fleet was granted court approval to pay $5.4 million in wages owed to its drivers and owner-operators. At press time, the fleet was scheduled for a final bankruptcy court hear- ing Jan. 3 to finalize a deal to pay its creditors. Celadon, one of the largest car- riers in the country, closed all its business units Dec. 9 except for its Taylor Express subsidiary, operated out of Hope Mills, North Carolina. The Indianapolis-based company, founded in 1985 with 50 trucks, operated more than 3,300 trucks and tractors at the time of its closure. As recently as 2015, Celadon contracted with about 1,000 owner-operators, but in 2017 the fleet said it was mov- ing away from using owner-operator drivers. In its Chapter 11 bankruptcy fil- ing, the company estimated its total assets to be $427 million and its debts at $391 million. Celadon said in its filings it owes $33 million to the U.S. Department of Justice as part of its settlement for fraudulently overstat- ing its profits in public earnings reports between 2014 and 2016. Celadon's many creditors include brokerages, leasing firms, fuel provid- ers such as Comdata and Pilot Flying J, Goodyear, Paccar and the fleet's lawyers, to whom it owes nearly $1.5 million. The company's closure came just days after its former chief operating officer, William Eric Meek, and its former chief financial officer, Bobby Lee Peavler, were charged by DOJ on counts of securities fraud, wire fraud, bank fraud and lying to investigators. Another former employee, Danny Williams, pleaded guilty in May to criminal charges as part of the same scandal. The New York Stock Exchange halted trading of Celadon stock in mid-2017 after the company pulled required financial filings. That hap- pened after an independent auditor found major discrepancies in the company's reports, with Celadon later admitting that it had overstated its income by as much as $250 million for 2014, 2015 and 2016. The overreported income was based on an alleged scheme in which former Celadon officials sold used trucks at an inflated price to third parties, then bought back the trucks at those inflat- ed prices as a way to avoid recording losses on equipment sales. The company hasn't filed quarterly earnings reports for any quarter since late 2017. In its most recent filing, for the first quarter of 2017, Celadon reported a loss of $10 mil- lion. The company since has paid a $42 million fine to settle a criminal probe brought by the Securities and Exchange Commission and DOJ. The company also paid $5.5 million to settle lawsuits brought in the wake of its delisting. With Celadon's 3,300 trucks and tractors – and nearly 10,000 trailers – idled in December, it further tilts the used truck market toward oversupply, said Chris Visser, J.D. Power's senior analyst and product manager for commercial vehicles. Through the first 10 months of 2019, 4- to 6-year-old trucks were bringing 10.7% less money than the same period of 2018, Visser said, and even that comparison was skewed heavily by market strength early in the year. "Fortunately for the used market, Celadon recently started taking deliv- ery of 2019 and 2020 models, which are valuable, but the additional hun- dreds of sleepers entering the market in 2020 will basically be a piling-on scenario," he said. "Celadon's trucks will be additional supply in a market that's already oversaturated." — James Jaillet and Jason Cannon Court gets OK to pay drivers $5.4M B U S I N E S S One analyst said the company's 3,300 trucks and trac- tors will add to the market's oversupply of used trucks. Partners in Business tip: Use overdraft protection The Partners in Business program, produced by Overdrive and financial services provider ATBS, is spon- sored by TBS Factoring Service. Find out what your bank offers for this ser vice, which automatically draws from your savings account or credit card account to cover a bad check. The credit card option isn't favorable for an undisciplined operator, but if the card balance is paid off quickly, interest charges likely will be less costly than bouncing a check.

Articles in this issue

Archives of this issue

view archives of Overdrive Magazine - January 2020