July 18, 2017 3:15 PM, EDT

Celadon’s New Management Brings In Turnaround Specialists

Celadon Group Inc. is undergoing managerial changes as it faces the results of a third audit to see whether it overvalued hundreds of used trucks.

Chairman and CEO Paul Will, a 24-year executive with the truckload carrier, will be replaced as of July 24, Celadon announced July 13.

He will be replaced as president by Paul Svindland, chairman and CEO of Farren International Holdings, who is experienced in turning troubled companies around.

Michael Miller, an independent Celadon director, will be the company’s new chairman of the board.

Celadon has been financially unsound of late and said earlier in July that it could record a goodwill impairment charge of up to $62.4 million as part of a probe into the value of all its assets, including a discrepancy over the worth of its used trucks.

Celadon ranks No. 33 on the Transport Topics Top 100 list of North American for-hire carriers.

Jeffrey Kaufman with Aegis Capital Corp., an analyst whose firm has been following Celadon’s stock and issued a ‘buy’ rating, highlighted some of the problems. “They went from 9% to 14% empty miles,” for one thing, and for another, they made “strategic missteps,” such as a buying spree of 13 to 16 companies that were depressed in value. But he believes Celadon can come back strong.

“It needs to shrink the road map and simplify the structure,” he said. And it needs to look at anywhere “freight is not making money because of empty miles or they’re not getting paid properly for cost and optimize the use of their vehicles and drivers.”

The new management also should focus on making drivers happier, increasing pay and offering a better schedule from “point A to Z so drivers want to work for the company,” he added.

Will, 51, joined Celadon in 1993 as its controller and advanced through a number of executive positions before he was tapped as its CEO in 2012 and then chairman in 2015.

Kaufman said the management shakeup is just about going to a more “operational” focus with Svindland.

Aegis issued a recent statement that says in part that a $12 price target, along with the new CEO appointment “continues a series of catalysts which are falling into place for the company’s eventual emergence from its recent troubles.”

Aegis’ statement said it expects future “accounting adjustments” to both the valuation applied by its joint venture with transportation funders 19th Capital Group as well as Celadon’s goodwill. “We believe most of these changes will be of a non-cash variety and that the company’s new credit line will be in place by the fall, providing more than adequate liquidity to allow Celadon to make the necessary operating changes to return to profitability.”

Svindland had been executive vice president and chief operating officer at Pacer International, an intermodal and logistics provider that was publicly traded until its acquisition by XPO Logistics Inc., “and he was a key part of the management team that engineering Pacer’s turnaround,” Aegis said.