Celadon says its financial reports back to 2014 can’t be relied on

Celadon is restating its earnings reports going back through 2014, a dramatic widening of an accounting issue that was first revealed almost a year ago.

On May 1 last year, Celadon, a company that in its most recent 10-K (from 2016) reported revenue of $978.7 million net of fuel surcharges, said then that its financial statements for 2016 and the quarter ending September 30 of that year “should no longer be relied on.” Celadon’s website describes the company as the “premier NAFTA carrier” in the U.S.

It also said that the Audit Committee of the company’s board had begun an investigation of the earnings, leading to the Monday announcement that the investigation had “identified errors that will require adjustments” to the financial statements from 2014, 2015, 2016 and 2017 “and potentially periods prior thereto.” The prepared statement issued late Monday by Celadon said the investigation is ongoing.

The statement cautioned that its discussion of the issues found in its investigation can change. But it provided a detailed recap of some of the things it found, “provided to indicate a general sense of the magnitude of the expected changes.”

Among them:

The end result? “(T)he cumulative effect of the adjustments, along with operating losses and other expenses since the Company’s last filed financial reports, are expected to reduce its reported stockholders’ equity materially,” the company said. “The adjustments are also anticipated to have a material impact on assets, liabilities, revenue, income (loss), and individual expense items in certain periods.”

The Celadon statement came on the same day that Roadrunner Transportation held a call with analysts and investors to discuss its recovery from accounting issues that also go back several years.

The good news announced by Celadon is that it shored up its capital structure. Celadon announced a new $100 million asset-based revolving credit facility, and is in discussions on a broader refinancing that would include roughly $200 million in term debt and the issuance of new equity.

In a prepared statement, CEO Paul Svindland, who was brought in last July to be CEO, conceded the magnitude of the investigation’s discoveries. But he stressed four points:

Because the company is not current in its financial reporting, and has not been for months, it will be losing its New York Stock Exchange listing and will be traded on the OTC Pink Sheets.

Like the collapse in Roadrunner’s stock price, Celadon shareholders also have taken a beating. In April 2015, Celadon was trading at approximately $27. It closed Monday down 25 cts to $3.45, but that was before the late-day announcement.

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