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 33rd 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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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
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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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Element (i) transferred, conveyed, and assigned to 19th Capital certain of Element’s beneficial interests in certain fleet assets described in the Subscription Agreement, together with the associated lease agreements (the “JV SUBI Interests”), held in the Element Transportation Asset Trust, a Delaware statutory trust (the “ETAT”), (ii) contributed an amount equivalent to $100.0 million in cash of equity to 19th Capital, which was applied against the outstanding principal balance of the Term Loans (as defined below) as part of a prepayment made on the Closing Date and settled on a net basis, and (iii) transferred, conveyed, and assigned to 19th Capital certain of Element’s beneficial interests in the certain other fleet assets described in the Subscription Agreement, together with the associated lease agreements (the “Equipment SUBI Interests”), held in the ETAT. In consideration of the foregoing, 19th Capital (i) issued to Element membership units of 19th Capital, which, after the consummation of the Transactions, constituted approximately 49.99% of the issued and outstanding units of 19th Capital, and (ii) received certain term loan financing from Element.
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·
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The Company (i) contributed $35.3 million in cash to 19th Capital, (ii) conveyed to 19th Capital equipment (primarily tractors) categorized as equipment held for sale, leasing assets held for sale, or leasing assets used with a net book value of $63.6 million, and (iii) received credit for $1.1 million of unencumbered cash in the bank accounts of 19th Capital immediately at the consummation of the Transaction. In consideration of the foregoing, 19th Capital (i) issued to the Company membership units of 19th Capital, which, after the consummation of the Transactions, constituted approximately 49.99% of the issued and outstanding units of 19th Capital, (ii) paid to the Company $31.8 million in cash for reimbursement of previous payments made by the Company related to the Element assets, and (iii) issued the Company an obligation to distribute restricted cash of 19th Capital and its subsidiaries at the closing of the Transactions of approximately $2.5 million at such time as such cash becomes unrestricted. Going forward, the Company has agreed not to enter into additional leases as lessor in the equipment leasing business, subject to a modest exception for short-term leasing pending ordinary course dispositions from the Company’s trucking fleet.
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·
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Board. 19th Capital will be governed by a board of managers (the “Board”). The Board will initially consist of four managers, of which two managers will be nominated by the Company and two managers will be nominated by Element.
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·
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Significant Actions. Certain Board actions, including, among other things, matters relating to 19th Capital’s capital structure and governance, distributions, budget and business plan, and borrowing requires the unanimous approval of the Board.
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Transfer Restrictions. Until 18 months from the Closing Date, no member of 19th Capital may transfer any membership interest in 19th Capital other than certain permitted transfers.
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Tag-Along; Right of First Offer. Customary tag-along and right of first offer provisions.
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Amended and Restated Program Agreement, dated November 14, 2014, by and among the Company, Leasing, and Element.
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Third Amended and Restated Reserve Account Agreement dated March 23, 2016, by and among the Company, Leasing, and Element.
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Third Amended and Restated Service Agreement dated March 23, 2016, by and among the Company, Leasing, and Element, including obligations thereunder to make advances to Element in respect of any lease payment shortfalls, or “Perfect Pay.”
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Source / (Use)
(in millions)
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Description
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$
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4,600
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Cash received – redemption
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6,700
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Cash received – receipt of deferred purchase price cash
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50,000
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Cash received – sale of Quality equipment
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31,800
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Cash received – reimbursement of Other Assets
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(35,300)
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Cash invested in 19th Capital at closing
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$
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57,800
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Net cash received at closing
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Source / (Use)
(in millions)
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Description
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$
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56,000
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Equipment contributed to 19th Capital at closing
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21,900
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Contribution of deferred sale assets from 9/30/2016
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50,000
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Equipment sold to Element at closing
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34,600
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Settlement of deferred sale assets from 6/30/2016
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$
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162,500
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Total equipment reduction at closing
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$
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14,300
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Contribution of deferred sale liability from 9/30/2016
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26,000
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Settlement of deferred sale liability from 6/30/2016
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$
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40,300
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Total reduction in liabilities at closing
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$
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77,900
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Equipment contributed to 19th Capital at closing
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(14,300)
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Other liabilities related to contributed deferred sales assets
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35,300
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Cash contributed to 19th Capital
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1,100
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Undistributed cash remaining with 19th Capital
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$
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100,000
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Total contribution to 19th Capital at closing
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·
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Long term assets. The collection of an amount previously recorded under “Other assets” will reduce this balance by approximately $31.8 million. Also, as part of the transaction the Company received proceeds of $6.7 million in payment of deferred purchase price from a sale to 19th Capital in the June 30, 2016 quarter. The remaining $1.9 deferred purchase price will be classified as a long term asset that will be collected at a later date.
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·
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Current liabilities. The receipt of proceeds from 19th Capital for the current portion of the deferred purchase price, as well as the contributed interest in the deferred purchase price related to two transactions in which tractors were sold to a 19th Capital SPE in the fourth quarter of FY 2016 and the first quarter of FY 2017, will reduce “deferred leasing revenue" liability by approximately $11.9 million.
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·
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Equipment held for sale, leased assets held for sale, and leased assets. Equipment with net book value of approximately $162.5 million was disposed of in connection with the Transactions. These assets were primarily recorded under equipment held for sale, leased assets held for sale, and leased assets. The Company does not expect to record a significant gain or loss on disposition of this equipment.
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·
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Long term liabilities. The receipt of proceeds from 19th Capital for the current portion of the deferred purchase price, as well as the contributed interest in the deferred purchase price related to tractors sold to a 19th Capital SPE in in the fourth quarter of FY 2016 and the first quarter of FY 2017, will reduce “other long term liability” by approximately $30.7 million.
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·
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Minority investment. Celadon expects to record approximately $100.0 million as a minority investment and record results of the joint venture using the equity method of accounting. The prior equity investment of $2.0 million in 19th Capital was redeemed and will not be outstanding.
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(d)
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Exhibits.
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EXHIBIT
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NUMBER
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EXHIBIT DESCRIPTION
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Celadon Group, Inc. press release announcing the closing of the joint venture
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CELADON GROUP, INC.
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Date: January 6, 2017
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By:
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/s/ Bobby Peavler
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Bobby Peavler
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Executive Vice President, Chief Financial Officer, and Treasurer
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EXHIBIT
NUMBER
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EXHIBIT DESCRIPTION
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Celadon Group, Inc. press release announcing the closing of the joint venture
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9503 East 33rd Street
Indianapolis, IN 46235-4207
(800) CELADON
(317) 972-7000
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For more information:
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FOR IMMEDIATE RELEASE
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Joe Weigel
Director of Marketing and Communication
(800) CELADON Ext. 7006
(317) 972-7006 Direct
jweigel@celadontrucking.com
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December 30, 2016
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Joint venture combines over 10,000 leasing assets under common management and ownership, creating a leading equipment lessor to the trucking industry
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Celadon's Quality Companies business unit contributes leasing assets and increases its recurring service revenue as service provider to the joint venture
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Non-controlling interest in joint venture to be accounted for under the equity method
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