Celadon closes abruptly, lays off nearly 4,000 employees

A trucking giant with a logistics warehouse in Greenwood closed abruptly Monday, laying off hundreds of employees locally, and thousands globally.

Celadon Group Inc. filed for Chapter 11 bankruptcy early Monday and said it had given up trying to restructure its operations and is shutting down immediately — a move that will wipe out nearly 4,000 jobs throughout the company, which was headquartered in Indianapolis.

The company is the subject of a multi-year federal probe into allegations of accounting fraud that came to a head just days ago with the indictments of two of its former leaders.

In a written statement Monday, CEO Paul Svindland, who was brought into the company in 2017 to clean up the mess, said the challenges proved too great to overcome.

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“We have diligently explored all possible options to restructure Celadon and keep business operations ongoing,” he said. “However, a number of legacy and market headwinds made this impossible to achieve.

“Celadon has faced significant costs associated with a multi-year investigation into the actions of former management, including the restatement of financial statements. When combined with the enormous challenges in the industry, and our significant debt obligations, Celadon was unable to address our significant liquidity constraints through asset sales or other restructuring strategies.”

Prior to Monday’s shutdown, Celadon had nearly 4,000 employees and was operating a fleet of about 3,300 tractors and 10,000 trailers.

Greenwood feels impact

It is unclear exactly how many jobs were in Greenwood. In January, the company reported to the Johnson County Development Corp. that it had about 1,000 regional employees. At least 500 of those jobs were in Indianapolis.

The news sent shock waves through central Indiana. In Greenwood, a sign that hung over the visitor entrance at its warehouse on the city’s eastside had already been removed by noon Monday.

“I’m really surprised. That’s a big trucking company,” Greenwood Mayor Mark Myers said when he learned of the news mid-morning Monday. “I am very concerned for their employees and their families that have been let go with no notice at this time of year.”

The move comes two weeks before Christmas, leaving hundreds of local families looking for work during the holidays.

“It is always unfortunate to hear of a company making a decision like this as we know it impacts families and residents of our county,” said Dana Monson, executive director of the Johnson County Development Corp.

The county has resources in place to help the hundreds of local Celadon employees who lost their jobs suddenly, including the local WorkOne office and the Work Ready Communities program for employees as they review their skills and consider future employment, Monson said.

“(We) have a number of growing companies in our county and region who need quality drivers and other employees now. We also have a number of staffing agencies in the county ready to assist the employees as they transition to a new career or company,” she said.

The last time Johnson County’s workforce suffered a similar blow came in 2012, when Best Buy closed a distribution facility in Franklin, Monson said. Within four months, Direct Shot Distributing moved into the building formerly owned by Best Buy, which laid off 223 local employees when it closed.

Myers suspects a similar outcome with the Celadon building, which the company was leasing, according to company documents and property records. There is a strong need for readily available warehouses, so it likely won’t sit vacant long, he said.

He was optimistic about former Celadon employees’ future in Greenwood, and said other Greenwood facilities are likely looking for quality truck drivers and office employees, and named at least two companies with operations similar to Celadon’s in Greenwood.

It is clear the news came as a shock to the company’s employees as well. Celadon was still hiring new employees as recently as last week. Some job postings were just four days old.

Entrepreneurial success story comes to an end

Stephen Russell, the son of a New York City taxi driver, launched the business with a single truck in 1985 and grew it into the largest provider of international truckload services in North America, with more than 150,000 annual border crossings between the United States, Canada and Mexico.

But the company lost its way after Russell stepped aside as CEO in 2012, four years before his death at age 76. In addition to operational challenges in recent years, Celadon became engulfed in what federal prosecutors called a massive accounting fraud. Prosecutors this year announced fraud charges against three former executives.

Through the years, Celadon expanded to offer a broad range of trucking-related services, including warehousing, supply chain logistics and tractor leasing.

Celadon said all of its more than two dozen business units will cease operations Monday except for Taylor Express, a trucking division based in Hope Mills, North Carolina. That business will continue to operate while Celadon seeks a buyer for it.

Celadon filed its Chapter 11 petition in Delaware. In the filing, the company said it has assets of about $427 million and debts of $391 million. The company, which estimated it has 5,000 to 10,000 creditors, will file more detailed financial information in the coming weeks.

In a message to drivers early this morning, Celadon asked them to deliver all loads currently in transit and said it would provide more information soon on where to return equipment. The company said drivers would be paid for miles completed.

A Facebook group created Saturday called “Celadon Assistance and Jobs” is flooded with posts from other trucking companies offering jobs. The page also contains posts from truckers reacting to the news, asking questions, offering advice and offering rides home to anyone who might be stranded.

Until recently, Celadon’s turnaround efforts had appeared to be gaining traction. On July 31, the company announced that it had obtained $165 million in new financing, which Svindland described at the time as “a solid platform for the next stage of our business turnaround.” The company said it intended to use the financing to update its aging trucking fleet.

But in a filing in bankruptcy court, Celadon Treasurer Kathryn Wouters said that around that time, business conditions for Celadon and other trucking companies took a precipitous turn for the worse, citing a decline in overall freight tonnage and excessive truck capacity in the market that led to a significant decline in freight rates. Also, volumes of loads in freight experienced decreasing numbers in 2019, Wouters said.

Accounting woes years in making

In May 2017, the company announced that its auditor, BKD LLP, had lost confidence in Celadon’s recent financial reports, and that investors should not rely on the accuracy of those reports.

On Thursday, the U.S. Department of Justice announced that Celadon’s former president and chief operating officer, William Eric Meek, 39, and its former chief financial officer, Bobby Lee Peavler, 40, had been indicted on multiple charges of fraud.

The U.S. Securities and Exchange Commission filed a civil suit against Meek and Peavler the same day.

Both the civil and criminal cases brought against the company’s former leaders last week allege that the they were involved in buying and selling trucks at inflated values through Celadon subsidiary Quality Cos. in 2016 to make Celadon’s financial condition appear stronger than it actually was.

In April, former Quality Cos. President Danny Williams, 36, pleaded guilty to conspiracy to commit securities fraud, make false statements to a public company’s accountants, and falsify books, records, and accounts of a public company.

Meek was Williams’ supervisor.

Also in April, Celadon entered a deferred prosecution agreement with the government under which it agreed to pay restitution of $42.2 million.

Celadon admitted last July that it was under criminal investigation over financial-reporting issues dating back to 2013.

In October 2017, the company revealed that it was under investigation by the SEC. And, in April 2018, Celadon said its problems were much older and deeper than expected, and that the company had likely overstated earnings by as much as $250 million during a three-year period that ended in 2016.

The company replaced most of its senior leadership team, including its CEO and chief financial officer. The firm also refocused on its core trucking business and exited several other lines of business.