Interview With The Chairman And CEO: Celadon Group Inc. (CGI) - Stephen Russell
December 20, 2011 - The Wall Street Transcript has just published Transportation and Logistics Report offering a timely review of the sector. This Special Report contains expert industry commentary through in-depth interviews with public company CEOs, Equity Analysts and Money Managers. Please find an excerpt below.
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Stephen Russell has served as Chairman and Chief Executive Officer of Celadon Group Inc. since founding the company in May 1985. Before Celadon, he worked in management positions, including Director of Advanced Product Planning for Ford Motor Company, Chief Financial Officer for RCA Corporation and President of Hertz Truck Corporation, now Penske Automotive Group, Inc. He holds a B.A. in mathematics and an MBA in finance and marketing from Cornell University. Mr. Russell is a Member of the American Trucking Association's executive committee. He serves as Chairman on the board of governors of the Indianapolis Museum of Art. He was selected by the World Trade Club of Indiana as its 2006 Global Business Person of the Year and has been awarded the Sagamore of the Wabash certificate by Gov. Mitch Daniels for his lobbying efforts for Indiana's adoption of daylight saving time. Mr. Russell was inducted into the Central Indiana Business Hall of Fame in February 2011.
TWST: When we spoke last year about Celadon's operations, you said 90% was truckload and 10% was nonasset based. Is that still the case?
Mr. Russell: It is a little more nonasset based now than it was then, but it's still fairly accurate. We are certainly growing Celadon's nonasset business, however, it is still not significant in terms of the whole company.
TWST: The company's operations are primarily long-haul full truckload. Where does Celadon operate?
Mr. Russell: About 35% of our business is between the U.S. and Mexico, about 15% is between the U.S. and Canada, and the rest is domestic. In the United States, we operate all over the country along a number of different trucking routes.
TWST: Are some areas growing faster than others?
Mr. Russell: Yes. Our Mexico business is growing faster because of the increased demand there. I recently had the opportunity to talk to someone at a Korean-owned company that does a lot of business around the world, and they've tripled the size of their plant in Mexico, adding products they previously haven't produced in Mexico. The cost of manufacturing in Mexico is now cheaper than China. We're well positioned there, and I believe we are doing more cross-border freight between the U.S. and Mexico. I just saw today that Mexico is the largest exporter of appliances and the U.S. is Mexico's largest trade partner. So it's a good place for freight going in and out.
TWST: What do you ship?
Mr. Russell: We ship everything. Our freight ranges from computers and appliances to toilet paper. We are not a refrigerated carrier, however, so we don't carry perishable items, but we carry almost everything else. Our customers include some of the biggest consumer companies, like Procter And Gamble and Wal-Mart, which carry a wide range of products.
TWST: You are a long-haul operator. What is the average length of a trip for you?
Mr. Russell: Unless it's dedicated for a specific customer, we rarely do less than 200 miles. Our average load is about 900 miles. We will occasionally do shorter routes for large, specific customers, but that's not where most of our business is.
TWST: Is the driver issue the biggest challenge you deal with as a manager?
Mr. Russell: I think in today's environment, yes. The driver issue is very challenging right now, and I focus on that quite a bit.
TWST: Where do you see the most opportunities right now?
Mr. Russell: We are constantly looking for opportunities. One that we executed about a month ago was acquiring the tractors and trailers of the dry-van division of a public company called Frozen Food Express. FFEX is its stock symbol. They put out a press release on October 5 indicating that they are going to stay focused on their refrigerated business and withdraw from the dry-van, nonrefrigerated business. So when we saw that release, we contacted them. We have what I call a SWAT team that constantly looks for acquisition opportunities for us. We have done about 10 acquisitions in the last 10 years, so they keep a close watch to see what becomes available.
We don't buy multiples of EBITDA. We buy the assets of companies that want to close or are going out of business, or like Frozen Food Express, are changing their business model, and we hire the drivers and take on the customers they previously serviced. Most of the time, we quickly sell the equipment, because it's generally older equipment and not something we want to keep. In the case of Frozen Food Express, there were about 230 trucks operated by FFEX in the dry-van business, which was called American Eagle.
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