<PAGE>
<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE PERIOD ENDED SEPTEMBER 30, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER: 0-23192
CELADON GROUP, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 13-3361050
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
9503 EAST 33RD STREET
ONE CELADON DRIVE
INDIANAPOLIS, IN 46236-4207
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (317) 972-7000
Indicate by check mark whether the Registrant (1) has filed all reports required
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the Registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
Yes X No ____
The number of shares outstanding of the Common Stock ($.033 par value) of the
Registrant as of the close of business on November 10, 1997 was 7,658,988.
<PAGE>
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CELADON GROUP, INC.
INDEX TO
SEPTEMBER 30, 1997 FORM 10-Q
PART I. FINANCIAL INFORMATION
<TABLE>
<S> <C>
Item 1. Financial Statements (Unaudited)
Condensed consolidated balance sheets at September 30, 1997
and June 30, 1997 . ................................................ 3
Condensed consolidated statements of operations -
For the three months ended September 30, 1997 and 1996............. 4
Condensed consolidated statements of cash flows -
For the three months ended September 30, 1997 and 1996.............. 5
Notes to condensed consolidated financial statements 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.................................... 11
PART II. OTHER INFORMATION
Item 5. Other ....................................................... 14
Item 6. Exhibits and Reports on Form 8-K............................. 14
</TABLE>
2
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<PAGE>
PART I - FINANCIAL INFORMATION
CELADON GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SEPTEMBER 30, JUNE 30,
1997 1997
---------------- ----------
(UNAUDITED)
<S> <C> <C>
A S S E T S
Current assets:
Cash and cash equivalents................................................... $1,598 $1,845
Trade receivables, net of allowance......................................... 29,995 27,736
Accounts receivable - other 1,951 1,616
Prepaid expenses and other current assets................................... 4,464 3,972
Tires in service ........................................................... 3,414 2,987
Income tax recoverable...................................................... 3,773 4,198
Current portion of notes receivable......................................... 675 ---
Deferred income tax assets ................................................. 1,579 1,568
--------- ---------
Total current assets .................................... 47,449 43,922
-------- --------
Property and equipment, at cost ................................................ 121,714 113,206
Less accumulated depreciation and amortization.............................. 32,479 29,424
-------- --------
Net property and equipment....................................... 89,235 83,782
-------- --------
Deposits ....................................................................... 526 523
Tires in service ............................................................... 1,923 2,057
Notes receivable, net of current portion........................................ 1,150 ---
Advance to affiliate............................................................ --- 1,933
Intangible assets............................................................... 719 750
Goodwill, net of accumulated amortization....................................... 8,405 4,848
Other assets.................................................................... 1,372 1,379
-------- ---------
Total assets................................................................ $150,779 $139,194
========= ========
L I A B I L I T I E S A N D S T O C K H O L D E R S ' E Q U I T Y
Current liabilities:
Accounts payable............................................................ $4,398 $5,284
Accrued expenses ........................................................... 16,333 14,535
Bank borrowings and current maturities of long-term debt.................... 1,500 ---
Current maturities of capital lease obligations............................. 11,554 11,376
------ ------
Total current liabilities.............................................. 33,785 31,195
------- ------
Long-term debt, net of current maturities ...................................... 14,444 11,959
Capital lease obligations, net of current maturities............................ 46,402 42,402
Deferred income tax liabilities ................................................ 8,640 7,832
--------- -------
Total liabilities........................................................... 103,271 93,388
-------- ------
Minority interest............................................................... 12 12
Commitments and contingencies................................................... --- ---
Stockholders' equity:
Preferred stock, $1.00 par value, authorized 179,985 shares, issued and
outstanding zero shares................................................... --- ---
Common stock, $.033 par value, authorized 12,000,000 shares; issued and
outstanding 7,750,580 shares at September 30, 1997 and June 30, 1997 ..... 256 256
Additional paid-in capital.................................................. 56,281 56,281
Retained earnings (deficit)................................................. (7,860) (9,531)
Equity adjustment for foreign currency translation.......................... (221) (252)
Treasury stock, at cost, 128,000 shares at September 30, 1997
and June 30, 1997 ........................................................ (960) (960)
-------- ----------
Total stockholders' equity............................................. 47,496 45,794
---------- ----------
Total liabilities and stockholders' equity............................. $150,779 $139,194
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
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CELADON GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
------------------------------
1997 1996
-------- -------
<S> <C> <C>
Operating revenue.................................................... $51,844 $46,192
------- -------
Operating expenses:
Salaries, wages and employee benefits............................ 17,481 17,134
Fuel............................................................. 7,289 7,483
Operating costs and supplies..................................... 3,986 3,303
Insurance and claims............................................. 1,577 1,241
Depreciation and amortization.................................... 2,956 2,288
Rent and purchased transportation ............................... 10,957 8,752
Professional and consulting fees................................. 415 210
Communications and utilities..................................... 780 745
Permits, licenses and taxes .................................... 861 1,058
Selling expenses................................................. 854 822
General and administrative....................................... 665 690
-------- ----------
Total operating expenses....................................... 47,821 43,726
------- --------
Operating income .............................................. 4,023 2,466
----- ---------
Other (income) expense:
Interest expense, net............................................ 1,284 981
Other, net....................................................... --- (9)
---------- ------------
Other (income) expenses, net .................................. 1,284 972
-------- ---------
Income before income taxes..................................... 2,739 1,494
Provision for income taxes........................................... 1,068 604
---------- ---------
Net income .................................................... $ 1,671 $ 890
========= ========
Earnings per common share:
Net income per share........................................... $0.22 $0.12
======= =========
Weighted average number of common shares and
equivalents outstanding.......................................... 7,708 7,643
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
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CELADON GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
( DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
----------------
1997 1996
------ ------
<S> <C> <C>
Continuing Operations:
Cash flows from operating activities:
Net income from continuing operations.................................. $1,671 $ 890
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization...................................... 2,956 2,288
Provision for deferred income taxes................................... 808 499
Provision for doubtful accounts....................................... 68 106
Changes in assets and liabilities:
Decrease in trade receivables...................................... 2,974 2,151
(Increase) in accounts receivable -- other......................... (168) (1,608)
Decrease in income tax recoverable................................. 414 295
(Increase) in tires in service..................................... (293) (796)
(Increase) decrease in prepaid expenses and other current assets.. (292) 602
Decrease in other assets........................................... 116 2,203
(Decrease) in accounts payable and accrued expenses................ (1,350) (2,074)
(Decrease) in income taxes payable................................. --- (308)
---------- -----------
Net cash provided by operating activities............................. 6,904 4,248
------- ---------
Cash flows from investing activities:
Purchase of property and equipment....................................... (1,174) (176)
Proceeds on sale of property and equipment............................... --- 6,211
Purchase of business, net of cash........................................ (4,566) ---
Disposals of property and equipment...................................... 223 ---
(Increase) decrease in deposits.......................................... (3) 284
---------- -------
Net cash provided by (used for) investing activities................. (5,520) 6,319
Cash flows from financing activities:
Purchase of treasury stock for cash...................................... --- (860)
Proceeds from bank borrowings and debt................................... 1,202 65
Payments of bank borrowings and debt .................................... --- (8,765)
Principal payments under capital lease obligations....................... (2,833) (1,680)
------- ---------
Net cash provided by (used for) financing activities ................. (1,631) (11,240)
------- -----------
(Decrease) in cash and cash equivalents.................................. (247) (673)
Cash and cash equivalents at beginning of year........................... 1,845 5,246
------ --------
Cash and cash equivalents at end of period............................... $1,598 $4,573
====== =======
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
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CELADON GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
(UNAUDITED)
(1) BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting principles
for interim financial reporting and the general instructions to Form 10-Q of
Regulation S-X. Accordingly, they do not include certain information and note
disclosures required by generally accepted accounting principles for annual
financial reporting and should be read in conjunction with the consolidated
financial statements and notes thereto of Celadon Group, Inc. (the "Company")
for the years ended June 30, 1997, 1996 and 1995 included in the Company's
annual report to stockholders.
The unaudited interim financial statements reflect all adjustments (all
of a normal recurring nature) which management considers necessary for a fair
presentation of the financial condition and results of operations for these
periods. The results of operations for the interim period are not necessarily
indicative of the results that may be reported for the full year.
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
The condensed consolidated balance sheet at June 30, 1997 was derived
from the audited consolidated balance sheet at that date.
(2) SEGMENT AND GEOGRAPHICAL INFORMATION; SIGNIFICANT CUSTOMER
The Company's operations consist of two divisions: truckload and
flatbed, and the Company generates revenue from its operations in the United
States and Mexico. Revenue from Chrysler accounts for a significant amount of
the Company's truckload revenue.
6
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CELADON GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
SEPTEMBER 30, 1997
(DOLLARS IN THOUSANDS)
(UNAUDITED)
Information as to the Company's operations by division is summarized below (in
thousands):
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
SEPTEMBER 30,
--------------------------
1997 1996
------- ------
<S> <C> <C>
Operating revenue:
Truckload..................................... $45,456 $41,206
Flatbed ........................................ 6,388 4,986
-------- ---------
Total....................................... $51,844 $46,192
======= =======
Operating income:
Truckload........................................ $4,248 $2,771
Flatbed ......................................... 252 192
------- -------
Total from operating divisions ................ 2,963 4,500
Corporate expenses.............................. 477 497
Interest expense................................ 1,346 998
Interest (income)................................ (62) (17)
Other (income)................................... --- (9)
----- -----
Income from operations before
income taxes................................ $2,739 $1,494
====== ======
Total assets:
Truckload........................................ $131,673 $113,045
Flatbed ......................................... 8,510 6,947
--------- ----------
Total from operating divisions.............. 140,183 119,992
Corporate........................................ 5,114 7,217
Discontinued operations (i)...................... 5,482 17,431
--------- ---------
Total....................................... $150,779 $144,640
======== ========
Capital expenditures (including capital leases):
Truckload........................................ $8,851 $15,101
Flatbed ......................................... 122 13
Corporate........................................ --- 7
--------- ------------
Total....................................... $8,973 $15,121
====== =======
Depreciation and amortization:
Truckload........................................ $2,896 $2,210
Flatbed ......................................... 60 60
Corporate........................................ --- 18
--------- ---------
Total....................................... $2,956 $2,288
====== ======
</TABLE>
(i) Remaining assets being liquidated related to operations discontinued in the
fiscal year ended June 30, 1996.
7
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<PAGE>
CELADON GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED STATEMENTS -- (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS)
(UNAUDITED)
Information as to the Company's operations by geographic area is summarized
below (in thousands):
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
SEPTEMBER 30,
-------------------------
1997 1996
---- ----
<S> <C> <C>
Operating revenue:
United States................. $49,777 $45,117
Mexico (i).................... 2,067 1,075
---------- ---------
Total ................... $51,844 $46,192
======= =======
Income (loss) before income taxes:
United States................. $2,589 $1,507
Mexico (i).................... 150 (13)
---------- ----------
Total ............... $2,739 $1,494
========= =======
Total assets: (ii)
United States................. $143,032 $124,796
Mexico (i).................... 2,265 2,413
---------- -----------
Total................... $145,297 $127,209
======== ========
</TABLE>
- ----------
(i) Relates to the Company's truckload operations in Mexico.
(ii) Excludes assets awaiting liquidation relating to operations discontinued in
fiscal year ended June 30, 1996.
Significant Customer:
Revenue from Chrysler accounted for approximately 45% and 51% of the
Company's truckload revenue for the three months ended September 30, 1997 and
1996, respectively. The Company transports Chrysler after-market replacement
parts and accessories within the United States and Chrysler original equipment
automotive parts primarily between the United States and the Mexican border,
which accounted for 26% and 74%, respectively, of the Company's revenue from
Chrysler for the three months ended September 30, 1997 and 29% and 71%,
respectively, for the three months ended September 30, 1996. Chrysler business
is covered by two agreements, one of which covers the United States-Mexico
business and the other of which covers domestic business. The international
contract was extended for three years and now expires on December 31, 1999. The
contract applicable to domestic business has expired but is the basis for
service provided pending negotiation of a new contract. No other customer
accounted for more than 5% of the Company's truckload revenue during any of the
periods presented.
8
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<PAGE>
CELADON GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
SEPTEMBER 30, 1997
(UNAUDITED)
(3) INCOME TAXES
The Company's effective tax rate differs from the statutory federal tax
rate of 35% due to state income taxes and certain expenses which are not
deductible for income tax purposes. The effective tax rates for continuing
operations for the three months ending September 30, 1997 and 1996 were 39% and
40%, respectively.
(4) HEDGING ACTIVITIES, COMMITMENTS AND CONTINGENCIES
The Company, from time-to-time, enters into arrangements to protect
against fluctuations in the price of the fuel used by its trucks. As of
September 30, 1997, the Company had contracts to purchase fuel for future
physical delivery in the months of November 1997 through April 1998. These
contracts represent approximately 22% of the anticipated fuel requirements in
those months. Additionally, the Company periodically acquires exchange-traded
petroleum futures contracts and various commodity collar transactions. Gains and
losses on transactions, not designated as hedges, are recognized based on market
value at the date of the financial statements. At September 30, 1997,
liquidation of outstanding transactions, not designated as hedges, which
extended through June 1998 and covered approximately 40% of the Company's fuel
requirements would have resulted in a $137 thousand gain. The current and future
delivery prices of fuel are monitored closely and transaction positions adjusted
accordingly. Total commitments are also monitored to ensure they will not exceed
actual fuel requirements in any period. During the quarter ending September 30,
1997 and 1996, gains of $174 thousand and $83 thousand, respectively, on futures
contracts and commodity collar transactions were shown as a reduction of fuel
expense.
Standby letters of credit, not reflected in the accompanying condensed
consolidated financial statements, aggregated approximately $2.2 million at
September 30, 1997.
The Company has outstanding commitments to purchase approximately $15.7
million of revenue equipment at September 30, 1997.
The Company has been assessed approximately $750 thousand by the State
of Texas for Interstate Motor Carrier Sales and Use Tax for the period from
April 1988 through June 1992. The Company disagrees with the State of Texas over
the method used by the state in computing such taxes and intends to vigorously
pursue all of its available remedies. On October 30, 1996, the Company made a
payment of $1.1 million, under protest, which includes interest to the date of
payment and enables the Company to pursue resolution of the matter with the
State of Texas Attorney General. In the March 1997 quarter, the Company filed
its Original Petition against representatives of the State of Texas. The state
responded and denied the Company's claims. As of September 30, 1997, the parties
to the litigation were exchanging discovery requests and documentation. The
Company has accrued an amount that management estimates is due based upon
methods they believe are appropriate. While there can be no certainty as to the
outcome, the Company believes that the ultimate resolution of this matter will
not have a material adverse effect on its consolidated financial position.
There are various claims, lawsuits and pending actions against the
Company and its subsidiaries incident to the operation of its business. The
Company believes many of these proceedings are covered in whole or in part by
insurance and that none of these matters will have a material adverse effect on
its financial position.
9
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<PAGE>
CELADON GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
SEPTEMBER 30, 1997
(DOLLAR AMOUNTS IN THOUSANDS)
(UNAUDITED)
(5) ACQUISITION
On August 25, 1997, the Company acquired the net assets of General
Electric Transportation Services ("GETS"), the transportation services unit of
the General Electric Industrial Control Systems ("GEICS") business. In addition
to the net assets acquired, the Company received a five-year contract to
continue providing transportation service to GEICS, which represents
approximately one-half of the current business volume of the transportation
services unit. The total acquisition price was $8.5 million payable as $5.5
million in cash at closing and a $3.0 million note plus assumption of certain
liabilities and lease obligations. The revenues and expenses of the operations
acquired from GEICS have been included in the Company's consolidated financial
statements since September 1, 1997.
(6) SUBSEQUENT EVENTS
On November 1, 1997, the warrant held by International Bancshares
Corporation was exercised. The warrant holder exercised the warrant by paying
the Company $250 thousand upon the issuance of 36,408 shares by the Company. In
connection with the warrant, the Company granted certain piggyback and demand
registration rights with respect to shares issued.
(7) SUPPLEMENTAL CASH FLOW INFORMATION
During the three months ended September 30, 1997 and 1996, capital lease
obligations in the amount of $7.0 million and $14.9 million, respectively were
incurred in connection with the purchase of, or option to purchase revenue
equipment (including tires in service).
10
<PAGE>
<PAGE>
Item 2. MANAGEMENT'S DISCUSSIONS AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
FORWARD-LOOKING STATEMENTS
This Report on Form 10-Q contains forward looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. Such comments
are based upon information currently available to management and management's
perception thereof as of the date of this report being filed. Actual results of
the Company's operations could materially differ from those forward looking
statements. Such differences could be caused by a number of factors including,
but not limited to, potential adverse affects of regulation and litigation;
changes in competition and the effects of such changes; increased competition;
change in fuel prices; changes in economic, political or regulatory
environments; changes in the availability of a stable labor force; ability of
the Company to hire drivers meeting Company standards; changes in management
strategies; environmental or tax matters; and risks described from time to time
in reports filed by the Company with the Securities and Exchange Commission.
Readers should take these factors into account in evaluating any such forward
looking statements.
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED WITH THE THREE MONTHS ENDED
SEPTEMBER 30, 1996
Revenue. Consolidated revenue from continuing operations of the Company
increased by $5.6 million, or 12%, to $51.8 million for the three months ended
September 30, 1997 (the "1997 period") from $46.2 million for the three months
ended September 30, 1996 (the "1996 period"). Revenue from the truckload
division which includes the Company's Mexican Subsidiary ("Jaguar") increased by
$4.3 million, or 10%, to $45.5 million in the 1997 period, including
approximately $2.0 million from the General Electric Transport Services ("GETS")
division acquired in September 1997, from $41.2 million in the 1996 period. This
increase was attributable principally to a 5% increase in overall rates per mile
in addition to the revenue generated from the GETS division. The volume of the
Company's transportation services between the United States and Mexico as well
as domestic markets measured in terms of revenue miles declined 1%. The number
of tractors operated by the Company's U.S. truckload operation in over-the-road
service rose to 1,269 at September 30, 1997 compared to 1,203 at September 30,
1996 excluding 49 tractors operated by the Company's Mexican affiliate in both
periods.
Revenue for Jaguar increased by $0.9 million, or 90%, to $1.9 million for
in the 1997 period from $1.0 million in the 1996 period, primarily as a result
of better equipment utilization and increased rates. In addition, Jaguar
increased revenues by expanding its fleet through the use of owner-operators
which began in the fourth quarter of fiscal year 1997.
Revenue for the flatbed division which operates under the name of Cheetah
Transportation Company ("Cheetah") increased by $1.4 million, or 28%, to $6.4
million for the 1997 period from $5.0 million for the 1996 period. The increase
is primarily due to the number of owner-operated tractors in Cheetah's network
which increased to 268 at September 30, 1997 from 219 at September 30, 1996.
Operating income. The truckload division operating income increased by
$1.5 million, or 56%, to $4.2 million in the 1997 period from $2.7 million in
the 1996 period. The operating ratio for the truckload division, which is the
percentage of operating expenses to its revenue, decreased to 90.7% in the 1997
period from
11
<PAGE>
<PAGE>
93.3% in the 1996 period. The decrease in the operating ratio is principally
related to the rate increase noted above in the United States based business as
a slight increase in the cost of driver pay per mile was offset by a reduction
in fuel cost per mile. Average fuel cost per gallon decreased to $1.00 in the
1997 period compared with $1.14 in the 1996 period. This cost decrease is net of
gains in the 1997 period of $174 thousand achieved in the Company's fuel price
management program or $0.026 per gallon consumed compared with $168 thousand
gain or $0.023 per gallon in 1996. Costs associated with the larger tractor
fleet partially offset the benefits of the price increases. The decrease in the
operating ratio was also attributable to operating income recognized in the
Jaguar division in the 1997 period compared with an operating loss in the 1996
period.
The Company's flatbed division operating ratio, which is typically higher
than the Company's truckload division since its revenue is generated by
owner-operators which are generally more expensive as a percentage of revenue
than the use of Company owned equipment, was 96.1% in both the 1997 and 1996
periods. In the 1997 period, the flatbed division payments to owner-operators of
$5.1 million, an increase of $1.2 million on higher volume are included in rent
and purchased transportation expense and payments to brokers of $0.5 million, an
increase of $0.1 million, are included in selling expense.
Interest expense. Interest expense increased by $0.3 million, or 30%, to
$1.3 million in the 1997 period from $1.0 million in the 1996 period, as a
result of higher average outstanding borrowings and an increase in the capital
lease obligations, which was partially offset by lower average interest rates.
Income taxes. The effective tax rates for the September 30, 1997 and 1996
periods were 39% and 40%, respectively. The effective tax rates are based upon
projected annual income and the impact of items taxed at other than statutory
rates. Generally, as projected income increases, the effect of costs which are
not deductible for tax purposes decreases and the effective tax rate is reduced.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary capital requirements in fiscal 1998 have been
funding the acquisition of revenue equipment for the truckload division. These
requirements have been met primarily by equipment leasing arrangements. At
September 30, 1997, the Company had a credit facility of $30.0 million from its
banks, of which $12.7 million was utilized as outstanding borrowings, and $2.2
million was utilized for standby letters of credit.
The credit facilities bear interest at either a margin over LIBOR or the
bank's prime rate, at the option of the Company. The weighted average interest
rate charged on outstanding borrowings was 7.44% at September 30, 1997. The
standby letter of credit portion of the Company's facility collaterizes the
Company's obligations under insurance policies for liability coverage relating
to its trucking operations.
The truckload division has financed some of its capital requirements by
obtaining sales-type lease financing and notes payable on revenue equipment. At
September 30, 1997, the Company had an aggregate of $58.0 million in such
financing at interest rates ranging from 5.7% to 10.6%, maturing at various
dates through 2005. Of this amount, $11.6 million is due within one year.
Additionally, the Company uses operating lease arrangements for some revenue
equipment. In the quarter ended, September 30, 1997, operating lease payments
for revenue equipment totaled $3.1 million compared with $4.1 million in the
September 1996 quarter.
12
<PAGE>
<PAGE>
As of September 30, 1997, the Company had on order revenue equipment
representing an aggregate capital commitment of $15.7 million. All of the new
equipment has been or will be financed using a combination of operating and
capital leases and the Company's credit facility.
The Company's accounts receivable balance relating to continuing
operations at September 30, 1997, increased $3.1 million to $29.4 million from
$26.3 million at June 30, 1997. The GETS operation, acquired in September 1997,
had receivables of $3.8 million and all other operations reflected a reduction
of $700 thousand.
The Company purchases fuel contracts from time-to-time for a portion of
its projected fuel needs. At September 30, 1997, the Company had contracts to
purchase for future delivery approximately 22% of its fuel requirements. The
Company's fuel price management program has not significantly impacted the
Company's recent operating results and has not adversely impacted the Company's
liquidity.
On November 1, 1997, the warrant held by International Bancshares
Corporation was exercised. The warrant holder exercised the warrant by paying
the Company $250 thousand upon the issuance of 36,408 shares by the Company.
Management believes that there are presently adequate sources of secured
equipment financing together with its existing credit facilities and cash flow
from operations to provide sufficient funds to meet the Company's anticipated
working capital requirements and fund the acquisition of tractors and trailers
presently on order. Additional growth in the tractor and trailer fleet beyond
the Company's existing orders will require additional sources of financing.
SEASONALITY
To date, the Company's revenues have not shown any significant seasonal
pattern. However, because the Company's trucking subsidiary's primary traffic
lane is between the Midwest United States and Mexico, winter generally may have
an unfavorable impact upon the Company's results of operations. Also, business
demands for full truckload service tend to fall during holidays in both the U.S.
and Mexico and the timing of holidays can therefore impact the Company's
operations in any particular period.
INFLATION
Many of the Company's operating expenses are sensitive to the effects of
inflation, which could result in higher operating costs. The effects of
inflation on the Company's businesses during fiscal 1997 and 1996 generally were
not significant.
13
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<PAGE>
PART II - OTHER INFORMATION
ITEM 5. OTHER
On October 17, 1997, the Company solicited proxies for its annual meeting
of stockholders to be held at the Hyatt Regency, One South Capital Ave.,
Indianapolis, Indiana 46236 on Monday, December 1, 1997 at 1:30 PM (local time)
for stockholders of record as of October 3, 1997.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8K
(a) Exhibits
Exhibit 10.52 -Sixth amendment dated August 28, 1997 to the Credit
Agreement dated June 1, 1994 between Celadon Group,
Inc. Celadon Trucking Services, Inc., and NBD Bank
N.A. and the First National Bank of Boston.
Exhibit 11 - Computation of per share earnings
Exhibit 27 - Financial Data Schedule
(b) Form 8-K None
14
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
CELADON GROUP, INC.
(Registrant)
/s/ Stephen Russell
----------------------------------------
Stephen Russell, Chief Executive Officer
/s/ Don S. Snyder
----------------------------------------
Don S. Snyder, Executive Vice President
Chief Financial Officer
Date: November 12, 1997
15
<PAGE>
<PAGE>
Exhibit 10.52
SIXTH AMENDMENT TO CREDIT AGREEMENT
THIS SIXTH AMENDMENT TO CREDIT AGREEMENT, dated as of August 28,
1997 (this "Amendment") by and among CELADON GROUP, INC., a Delaware corporation
("CG"), CELADON TRUCKING SERVICES, INC., a New Jersey corporation ("Trucking")
(collectively with CG, referred to as the "Companies" and individually, each a
"Company"), the Banks set forth on the signature pages of the Credit Agreement
referred to below (collectively, the "Banks" and individually, each a "Bank"),
NBD BANK, N.A., a national banking association, assignee of NBD Bank, as
co-agent for the Banks ("Co-Agent A") and BANKBOSTON, N.A., formerly known as
The First National Bank of Boston, a national banking association, as co-agent
for the Banks ("Co-Agent B" and together with Co-Agent A, referred to as the
"Co-Agents").
RECITALS
A. CG, Trucking, the Banks and the Co-Agents are parties to a
Credit Agreement dated as of June 1, 1994, as amended by a First Amendment to
Credit Agreement dated as of October 31, 1994, a Second Amendment to Credit
Agreement dated as of October 31, 1995, letter agreements dated January 31,
1996, February 15, 1996 and June 29, 1996, a Third Amendment to Credit Agreement
dated as of September 13, 1996, letter agreements dated as of November 25, 1996
and December 18, 1996, a Fourth Amendment to Credit Agreement dated as of March
24, 1997 and a Fifth Amendment to Credit Agreement dated as of June 30, 1997 (as
amended, the "Credit Agreement").
B. The Companies have requested that the Co-Agents and the Banks
make certain amendments to the Credit Agreement, and the Co-Agents and the Banks
are willing to do so strictly in accordance with the terms hereof, and provided
the Credit Agreement is amended as set forth herein, and the Companies have
agreed to such amendments.
AGREEMENT
Based upon these recitals, the parties agree as follows:
1. Upon satisfaction of the conditions set forth in paragraph 4
hereof, the Credit Agreement shall hereby be amended as of the effective date
hereof as follows:
(a) The definition of "Applicable Margin" in Section 1.1 shall
be amended as follows:
(i) Line 5 in the table shall be deleted and line 5 below shall
be substituted in place thereof and a new line 6 shall be added in
the form set forth below:
1
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Revolving Credit Letter of Commitment
Loans Term Loans Credit Fees Fees
--------------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
5. If the Leverage
Ratio is greater
than or equal to
2.75 to 1.0 but less
than 3.30 to 1.0
OR the Fixed
Charge Coverage
Ratio is less than
or equal to 1.20 to
1.0 1-5/8% 1-7/8% 1-5/8% 1/2%
6. If the Leverage
Ratio is greater
than 3.30 to 1.0 1-3/4% 2% 1-3/4% 1/2%
</TABLE>
(ii) The last paragraph of such definition shall be amended by
deleting the reference in the fourth sentence to "clause 5" and
inserting "clause 6" in place thereof.
(d) Sections 5.2(a) and (b) shall be deleted in their entirety
and the following shall be inserted in place thereof:
(a) Tangible Net Worth. Permit or suffer the Consolidated
Tangible Net Worth of the Companies and their Subsidiaries at any
time to be less than an amount equal to the sum of (A) $35,500,000,
commencing on June 30, 1997, plus (B) an amount equal to 50% of the
Consolidated Cumulative Net Income (without reduction for net loss)
of the Companies and their Subsidiaries, to be added as of the end of
each fiscal quarter of the Company commencing with the fiscal quarter
ending September 30, 1997 plus (C) an amount equal to 80% of the
proceeds received in connection with the offering of any securities
of any Company.
(b) Leverage Ratio. Permit or suffer the Leverage Ratio as of the
end of any fiscal quarter of the Companies to be greater than: (i) as
of the fiscal quarter ending in September, 1997 to and including the
fiscal quarter ending in March, 1998, 3.90 to 1.0, (ii) as of the
fiscal quarter ending in June, 1998 to and including the fiscal
quarter ending in March, 1999, 3.5 to 1.0, (iii) as of the fiscal
quarter ending in June, 1999 to and including the fiscal quarter
ending in March, 2000, 3.0 to 1.0 and (iv) as of the fiscal quarter
ending in June, 2000 and as of the end of each fiscal quarter
thereafter, 2.50 to 1.0.
2
<PAGE>
<PAGE>
2. From and after the effective date of this Amendment,
references to the "Credit Agreement" in the Credit Agreement, the Revolving
Credit Notes, the Term Notes, the Security Documents and all other documents
executed pursuant to the Credit Agreement shall be deemed references to the
Credit Agreement as amended hereby.
3. Each Company represents and warrants to the Co-Agents
and the Banks that:
(a) (i) The execution, delivery and performance of this Amendment
by the Company and all agreements and documents delivered pursuant hereto by the
Company have been duly authorized by all necessary corporate action and do not
and will not require any consent or approval of its stockholders, violate any
provision of any law, rule, regulation, order, writ, judgment, injunction,
decree, determination or award presently in effect having applicability to it or
of its articles of incorporation or bylaws, or result in a breach of or
constitute a default under any indenture or loan or credit agreement or any
other agreement, lease or instrument to which the Company is a party or by which
it or its properties may be bound or affected; (ii) no authorization, consent,
approval, license, exemption of or filing a registration with any court or
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign, is or will be necessary to the valid execution, delivery or
performance by the Company of this Amendment and all agreements and documents
delivered pursuant hereto and (iii) this Amendment and all agreements and
documents delivered pursuant hereto by the Company are the legal, valid and
binding obligations of the Company enforceable against it in accordance with the
terms thereof.
(b) After giving effect to the amendments contained herein and
effected pursuant hereto, the representations and warranties contained in
Article IV of the Credit Agreement are true and correct on and as of the
effective date hereof with the same force and effect as if made on and as of
such effective date.
(c) No Event of Default (as defined in Article VI of the Credit
Agreement) and no Default shall have occurred and be continuing or will exist
under the Credit Agreement as of the effective date hereof.
4. This Amendment shall not become effective until executed
by the Companies, the Banks and the Co-Agents.
5. Each Company agrees to pay and save Co-Agents harmless from
liability for the payment of all costs and expenses arising in connection with
this Amendment, including the reasonable fees and expenses of Dickinson, Wright,
Moon, Van Dusen & Freeman, counsel to Co-Agent A, and Bingham, Dana & Gould,
counsel for Co-Agent B, in connection with the preparation and review of this
Amendment and any related documents.
6. The terms used but not defined herein shall have the
respective meanings ascribed thereto in the Credit Agreement. Except as
expressly contemplated hereby, the Credit Agreement, and all related notes,
guaranties, certificates, instruments and other documents, are hereby ratified
and confirmed and shall remain in full force and effect, and each Company
acknowledges that it has no defense, offset or counterclaim thereunder.
7. This Amendment shall be governed by and construed in
accordance with the laws of the State of Michigan.
3
<PAGE>
<PAGE>
8. This Amendment may be executed in any number of counterparts,
all of which taken together shall constitute one and the same instrument and any
of the parties hereto may execute this Amendment by signing any such
counterpart.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment
to be duly executed and delivered as of the day and year first above written.
CELADON GROUP, INC.
By: /s/ Don S. Snyder
------------------------------
Its: Chief Financial Officer
CELADON TRUCKING SERVICES, INC.
By: /s/ Don S. Snyder
------------------------------
Its: Chief Financial Officer
NBD BANK, N.A., assignee of NBD Bank,
individually and as Co-Agent A
By: /s/ Scott Morrison
-------------------------------
Its: Vice President
BANKBOSTON, N.A., formerly known as The
First National Bank of Boston, individually
and as Co-Agent B
By: /s/ Michael J. Blake
Its: _________________
4
<PAGE>
<PAGE>
EXHIBIT 11
CELADON GROUP, INC.
COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
SEPTEMBER 30,
----------------------------
1997 1996
------ ------
<S> <C> <C>
PRIMARY:
Weighted average shares issued.................... 7,750,580 7,750,580
Weighted average shares in treasury............... (128,000) (110,858)
Dilutive effect of options and warrants using the
average market price under the treasury stock
method............................................ 85,483 3,719
----------- ---------
Shares used to compute primary earnings per share. 7,708,063 7,643,441
=========== =========
Net income attributable to common stockholders........ $1,670,727 $890,396
========== ========
Net income per common share........................... $0.22 $0.12
===== =====
FULLY DILUTED:
Shares used to compute primary earnings per share. 7,708,063 7,643,441
Incremental dilutive effect of options and warrants
using the higher of average price or period end price
under the treasury stock method.................... 33,665 10,867
----------- ----------
Shares used to compute fully diluted earnings per share 7,741,728 7,654,308
========= =========
Net income attributable to common stockholders........ $1,670,727 $890,396
========== ========
Net income per common share........................... $0.22 $0.12
===== =====
</TABLE>
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
condensed consolidated balance sheet of Celadon Group, Inc. at September 30,
1997 and the condensed consolidated statement of operations of Celadon Group,
Inc. for the quarter then ended and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> SEP-30-1997
<CASH> 1,598
<SECURITIES> 0
<RECEIVABLES> 32,243
<ALLOWANCES> (2,248)
<INVENTORY> 0
<CURRENT-ASSETS> 47,449
<PP&E> 121,714
<DEPRECIATION> (32,479)
<TOTAL-ASSETS> 150,779
<CURRENT-LIABILITIES> 33,785
<BONDS> 73,900
0
0
<COMMON> 256
<OTHER-SE> 47,240
<TOTAL-LIABILITY-AND-EQUITY> 150,779
<SALES> 0
<TOTAL-REVENUES> 51,844
<CGS> 0
<TOTAL-COSTS> 47,821
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,284
<INCOME-PRETAX> 2,739
<INCOME-TAX> 1,068
<INCOME-CONTINUING> 1,671
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> 0.22
<EPS-DILUTED> 0.22
</TABLE>
