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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Celadon Group Inc (CE) | USOTC:CGIP | OTCMarkets | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
-0.0016 | -80.00% | 0.0004 | 0.0004 | 0.0004 | 0.0004 | 2,300 | 15:19:25 |
Delaware
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001-34533
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13-3361050
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(State or other jurisdiction
of incorporation)
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(Commission
File Number)
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(IRS Employer
Identification No.)
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9503 East 33
rd
Street
One Celadon Drive, Indianapolis, IN
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46235
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(Address of principal executive offices)
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(Zip Code)
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[ ]
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
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[ ]
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
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[ ]
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
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[ ]
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
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[ ]
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Emerging growth company
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[ ]
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
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Item 1.01 |
Entry into a Material Definitive Agreement.
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Item 2.06 |
Material Impairments.
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Item 4.02 |
Non-Reliance on Previously Issued Statements or a Related Audit Report or Completed Interim Review.
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·
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Equipment Held for Sale Transactions
.
The internal investigation has revealed transactions involving revenue equipment held for sale by the Quality Companies subsidiary that included undisclosed arrangements that overstated the values of equipment traded in those transactions. Pursuant to these transactions, the Company sold to counterparties equipment at above market prices and in return the Company paid amounts substantially in excess of the fair value of equipment purchased from those counterparties. Additionally, the written agreement governing certain of these transactions with a particular counterparty omitted material, agreed upon terms in order to enable the Company to account for those transactions as separate, independent purchases and sales, notwithstanding that they had not been negotiated as such and the stated values of a significant portion of the traded equipment was not at arm’s-length values. Based on this information, the Company performed additional procedures to determine the fair value of equipment both purchased and sold and concluded that a write down of carrying values of revenue equipment held for sale of approximately $20 million is appropriate at June 30, 2016. The carrying values of this equipment will be restated to reflect management’s determination of fair values at the relevant periods, which may include dates prior to June 30, 2016. The adjustment will be non-cash, and no future impact to the carrying value of this equipment is expected because all of the affected equipment was disposed of or contributed to the 19
th
Capital Group, LLC (“19
th
Capital”) joint venture prior to December 31, 2016.
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·
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Element Transactions
. The Company determined that equipment transactions with Element Financial Corp. and its affiliates (“Element”) and 19
th
Capital (prior to its recapitalization on December 30, 2016), did not sufficiently transfer the risks of ownership to qualify for sales accounting. Instead, the Company should have recorded such transactions as borrowings due to the terms of the relevant agreements, including amendments, and the manner in which the Company administered the Element transactions. Under borrowing accounting, the Company would continue to recognize equipment assets on its books and would reflect the proceeds received from Element and 19
th
Capital as financing obligations. The assets would continue to be depreciated, the payments would be recorded as a reduction of obligations and an increase to interest expense, amounts collected from lessees would be recorded as revenue and payments for maintenance would be expensed. The Company expects to record non-cash adjustments for the affected periods: fiscal 2014, fiscal 2015, fiscal 2016, and the first two quarters of fiscal 2017. At the end of the second quarter of fiscal 2017, borrowing treatment would cease due to the contribution of the relevant assets and liabilities to 19
th
Capital on December 30, 2016.
|
o
|
The balance sheet adjustments relating to these transactions are expected to result in an increase in reported asset values in the Company’s statements of financial position totaling approximately $500 million for the three-year period ended June 30, 2016. Adjustments related to liabilities are expected to result in an increase in reported values in the Company’s statements of financial position totaling approximately $700 million for the three-year period ended June 30, 2016. Adjustments for both assets and liabilities for the first two quarters of fiscal 2017 are still under review.
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o
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The income statement impacts relating to these adjustments are expected to reduce net income before income taxes by a range of $200-$250 million cumulatively over the three-year period ended June 30, 2016. In addition to considering the impact on these periods, the Company is reviewing the impact for the first two quarters of 2017.
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o
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The reversal of borrowing accounting at December 30, 2016, is expected to remove all of the assets and liabilities described above from the balance sheet and result in a significant non-cash gain due to the elimination of liabilities in excess of assets. The amount of the gain is still under review and will be offset in part by the amount by which the opening recorded value of the Company's equity investment in 19
th
Capital is adjusted below $100 million, as discussed below.
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·
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19
th
Capital Investment
. On December 30, 2016, the Company and Element Transportation, LLC (“Element Transportation”) each contributed certain assets to 19
th
Capital and, in exchange, each received approximately 49.9% of the equity interests in 19
th
Capital. Element Transportation contributed its beneficial interests in certain fleet assets, the associated lease agreements, and cash, which was immediately applied to pay down the outstanding principal balance of loans made by Element Transportation to 19
th
Capital. Element Transportation also made a daylight loan to 19
th
Capital in the amount of $31.8 million, which was used to satisfy an outstanding payable obligation to the Company. The Company contributed certain assets held for sale, leasing assets, and cash. Based upon adjustments related to equipment held for sale, including those noted above, the original $100 million recorded value of the Company’s initial contribution to 19
th
Capital at its December 30, 2016 inception will be reduced. The Company is evaluating whether any further adjustment for items other than equipment values is appropriate. The expected total adjustment will relate to the fair values of the assets, liabilities and equity of 19
th
Capital contributed by both the Company and Element Transportation, the assets and liabilities retained by 19
th
Capital, as well as aspects of the accounting for the recapitalization of 19
th
Capital. The restated carrying value of the equity investment as of December 31, 2016, coupled with net losses of 19
th
Capital subsequent to December 31, 2016, may result in a reduction of the Company's equity method investment to as low as zero.
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·
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Lease Classification
.
The Company determined that a portion of the Company's equipment leases currently accounted for as operating leases should be restated as capitalized leases primarily due to the default and cross default provisions in such agreements. The affected periods include fiscal 2014, fiscal 2015, fiscal 2016, and the first two quarters of fiscal 2017, and some of such leases remain in effect. The impact on net income in any given period is not expected to be significant. The impact on stockholders' equity is not expected to be significant because the recorded assets and liabilities are expected to be approximately equal. The adjustment to assets and liabilities in the Company’s statements of financial position are expected to total approximately $150 million for the three-year period ended June 30, 2016.
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·
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Other
. The Company is reviewing other accounting areas in each affected period as part of the financial restatement issuance process. Additional items identified to date and presently under review include: (1) carrying values of, and depreciation policies applicable to, tractors and trailers used in operations, (2) reserves applicable to claims and accounts receivable, (3) foreign currency gains and losses, (4) potential impairments of property, plant and equipment related to the Element transactions, and (5) the Company’s deferred income tax liability in light of the various adjustments. Any adjustments associated with these issues could be material and some of them may impact current and future periods.
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(d)
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Exhibits.
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||
EXHIBIT
|
|||
NUMBER
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EXHIBIT DESCRIPTION
|
||
Eighth Amendment to Amended and Restated Credit Agreement dated March 30, 2018.
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|||
Press Release dated April 2, 2018.
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CELADON GROUP, INC.
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||
Date: April 3,
2018
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By:
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/s/ Thomas S. Albrecht
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Thomas S. Albrecht
Executive Vice President, Chief Financial Officer,
and Chief Strategy Officer
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EXHIBIT
NUMBER
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EXHIBIT DESCRIPTION
|
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Eighth Amendment to Amended and Restated Credit Agreement dated March 30, 2018.
|
||
Press Release dated April 2, 2018.
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