<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 DECEMBER 31, 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 February 6, 1998 was 7,650,155.
<PAGE>
<PAGE>
CELADON GROUP, INC.
INDEX TO
DECEMBER 31, 1997 FORM 10-Q
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed consolidated balance sheets at December 31, 1997
and June 30, 1997................................................3
Condensed consolidated statements of operations - For the three and
six months ended December 31, 1997 and 1996......................4
Condensed consolidated statements of cash flows - For the six months
ended December 31, 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......................................................17
Item 6. Exhibits and Reports on Form 8-K...........................17
2
<PAGE>
<PAGE>
PART I - FINANCIAL INFORMATION
CELADON GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS EXCEPT SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1997 1997
----- ----
<S> <C> <C>
A S S E T S
Current assets:
Cash and cash equivalents................................................... $1,435 $1,845
Trade receivables, net of allowance......................................... 27,299 27,736
Accounts receivable - other................................................. 3,148 1,616
Prepaid expenses and other current assets................................... 4,436 3,972
Tires in service ........................................................... 3,618 2,987
Income tax recoverable...................................................... 3,649 4,198
Current portion of notes receivable......................................... 575 ---
Deferred income tax assets ................................................. 1,172 1,568
---------- ---------
Total current assets .................................................. 45,332 43,922
--------- --------
Property and equipment, at cost ................................................ 125,472 113,206
Less accumulated depreciation and amortization.............................. 33,490 29,424
--------- --------
Net property and equipment....................................... 91,982 83,782
--------- --------
Deposits ....................................................................... 573 523
Tires in service ............................................................... 2,231 2,057
Notes receivable, net of current portion........................................ 1,006 ---
Advance to affiliate............................................................ --- 1,933
Intangible assets............................................................... 688 750
Goodwill, net of accumulated amortization....................................... 8,370 4,848
Other assets.................................................................... 1,381 1,379
-------- --------
Total assets................................................................ $151,563 $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............................................................ $4,554 $5,284
Accrued expenses ........................................................... 14,649 14,535
Bank borrowings and current maturities of long-term debt.................... 1,500 ---
Current maturities of capital lease obligations............................. 13,523 11,376
-------- -------
Total current liabilities.............................................. 34,226 31,195
---------- ------
Long-term debt, net of current maturities ...................................... 10,057 11,959
Capital lease obligations, net of current maturities............................ 49,672 42,402
Deferred income tax liabilities ................................................ 8,665 7,832
-------- -------
Total liabilities........................................................... 102,620 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 7,786,430 and 7,750,580 shares at December 31, 1997
and June 30, 1997, respectively .......................................... 257 256
Additional paid-in capital.................................................. 56,560 56,281
Retained earnings (deficit)................................................. (6,346) (9,531)
Equity adjustment for foreign currency translation.......................... (285) (252)
Treasury stock, at cost, 147,442 and 128,000 shares at
December 31, 1997 and June 30, 1997, respectively ....................... (1,255) (960)
--------- ---------
Total stockholders' equity............................................. 48,931 45,794
--------- --------
Total liabilities and stockholders' equity............................. $151,563 $139,194
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE>
<PAGE>
CELADON GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED FOR THE SIX MONTHS ENDED
DECEMBER 31, DECEMBER 31,
-------------------------- ------------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Operating revenue $ 56,836 $ 46,743 $108,680 $ 92,935
-------- -------- -------- --------
Operating expenses:
Salaries, wages and employee benefits........ 17,053 16,339 34,535 33,473
Fuel......................................... 7,800 7,581 15,089 15,063
Operating costs and supplies................. 4,493 3,660 8,479 6,548
Insurance and claims......................... 1,773 969 3,351 2,625
Depreciation and amortization................ 3,159 2,592 6,114 4,880
Rent and purchased transportation............ 15,193 8,487 26,150 17,238
Professional and consulting fees............. 423 389 838 600
Communications and utilities................. 814 745 1,594 1,490
Permits, licenses and taxes................. 1,062 1,018 1,922 2,076
Employee stock ownership plan contribution .. --- --- --- 34
(Gain) on sale of revenue equipment.......... (10) --- (10) ---
Selling expenses............................. 902 653 1,756 1,475
General and administrative................... 603 845 1,268 1,502
-------- -------- --------- --------
Total operating expenses................. 53,265 43,278 101,086 87,004
-------- -------- --------- --------
Operating income................................. 3,571 3,465 7,594 5,931
Other (income) expense:
Interest income.............................. (285) (5) (348) (98)
Interest expense............................. 1,426 1,383 2,773 2,456
Other (income) expense, net.................. 2 (37) 1 (46)
-------- -------- --------- --------
Income before income taxes .................. 2,428 2,124 5,168 3,619
Provision for income taxes................... 915 850 1,983 1,448
-------- --------- -------- --------
Net Income ................................ $ 1,513 $ 1,274 $ 3,185 $ 2,171
======= ======= ======= ========
Earnings per Common Share:
Diluted Earnings Per Share................... $0.20 $0.17 $0.41 $0.28
Basic Earnings Per Share..................... $0.20 $0.17 $0.42 $0.28
Average Shares Outstanding:
Diluted...................................... 7,751 7,651 7,730 7,647
Basic........................................ 7,649 7,628 7,636 7,634
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE>
<PAGE>
CELADON GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLAR AMOUNTS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
DECEMBER 31,
---------------------------
1997 1996
---- ----
<S> <C> <C>
Continuing Operations:
Cash flows from operating activities:
Net income............................................................. $3,185 $2,171
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization......................................... 6,114 4,880
Provision for deferred income taxes................................... 833 853
Provision for doubtful accounts....................................... 66 131
Net (gain) on sale of property and equipment.......................... (10) ---
Changes in assets and liabilities:
Decrease in trade receivables...................................... 5,672 3,762
(Increase) decrease in accounts receivable -- other................ (1,365) 1,624
Decrease in income tax recoverable................................. 945 208
(Increase) in tires in service..................................... (881) (482)
(Increase) in prepaid expenses and other current assets........... (264) (447)
Increase (decrease) in other assets................................ 257 (205)
(Decrease) in accounts payable and accrued expenses................ (2,878) (3,795)
Increase in income taxes payable................................... --- 191
--------- --------
Net cash provided by operating activities............................. 11,674 8,891
--------- --------
Cash flows from investing activities:
Purchase of property and equipment....................................... (1,255) (862)
Proceeds on sale of property and equipment............................... 2,506 13,798
Purchase of business, net of cash........................................ (4,626) ---
Disposals of property and equipment...................................... 338 ---
Increase in deposits..................................................... (50) 285
-------- --------
Net cash provided by (used for) investing activities................ (3,087) 13,221
-------- --------
Cash flows from financing activities:
Proceeds from issuance of common stock................................... 250 ---
Purchase of common stock held in treasury................................ (337) (235)
Proceeds from issuance of common stock held in treasury.................. 72 ---
Proceeds from bank borrowings and debt................................... --- 132
Payments of bank borrowings and debt .................................... (3,185) (17,133)
Principal payments under capital lease obligations....................... (5,797) (5,649)
-------- --------
Net cash (used for) financing activities ............................. (8,997) (22,885)
-------- --------
(Decrease) in cash and cash equivalents.................................. (410) (773)
Cash and cash equivalents at beginning of year........................... 1,845 5,246
-------- ----------
Cash and cash equivalents at end of period............................... $ 1,435 $ 4,473
========= =========
See accompanying notes to condensed consolidated financial statements.
5
<PAGE>
<PAGE>
CELADON GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 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.
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 continuing 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
<PAGE>
<PAGE>
CELADON GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1997
(UNAUDITED)
Information as to the Company's operations by division is summarized below (in
thousands):
</TABLE>
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED FOR THE SIX MONTHS ENDED
DECEMBER 31, DECEMBER 31,
-------------------------- ------------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Operating revenue:
Truckload............................... $50,655 $41,069 $96,111 $ 82,274
Flatbed................................. 6,181 5,674 12,569 10,661
--------- -------- --------- --------
Total............................... $56,836 $46,743 $108,680 $92,935
========= ======== ========= ========
Operating income:
Truckload............................... $ 3,150 $ 3,141 $ 6,921 $ 5,416
Flatbed................................. 421 324 673 515
--------- -------- --------- --------
Total............................... 3,571 3,465 7,594 5,931
Interest expense, net...................... (1,141) (1,378) (2,425) (2,358)
Other income (expense)..................... (2) 37 (1) 46
--------- -------- --------- --------
Income from operations before
incomes taxes........................... $ 2,428 $2,124 $5,168 $ 3,619
========= ======== ========= ========
Capital expenditures (including capital leases):
Truckload............................... $8,121 $ 13,291 $16,972 $28,399
Flatbed................................. --- 19 122 32
--------- -------- --------- --------
Total............................... $8,121 $ 13,310 $17,094 $ 28,431
========= ======== ========= ========
Depreciation and amortization:
Truckload............................... $3,099 $ 2,533 $5,995 $ 4,761
Flatbed................................. 60 59 119 119
--------- -------- --------- --------
Total............................... $3,159 $ 2,592 $6,114 $ 4,880
========= ======== ========= ========
Total assets:
Truckload........................................................... $138,255 $ 134,011
Flatbed............................................................. 8,726 6,647
---------- ---------
Subtotal........................................................ 146,981 140,658
Discontinued operations (i)......................................... 4,582 11,017
---------- ---------
Total........................................................... $151,563 $151,675
========== =========
</TABLE>
(i) Remaining assets being liquidated related to operations discontinued in
the fiscal year ended June 30, 1996.
7
<PAGE>
<PAGE>
CELADON GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED STATEMENTS -- (CONTINUED)
(UNAUDITED)
Information as to the Company's operations by geographic area is summarized
below (in thousands):
<TABLE>
FOR THE THREE MONTHS FOR THE SIX MONTHS ENDED
December 31, DECEMBER 31,
-------------------- ------------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Operating revenue:
United States..................... $54,585 $45,453 $104,362 $90,569
Mexico (i)........................ 2,251 1,290 4,318 2,366
--------- -------- -------- --------
Total........................... $56,836 $46,743 $108,680 $92,935
========= ======== ======== ========
Income (loss) before income taxes:
United States..................... $ 2,183 $ 2,147 $ 4,772 $ 3,654
Mexico (i)........................ 245 (23) 396 (35)
--------- -------- -------- --------
Total........................... $ 2,428 $ 2,124 $ 5,168 $ 3,619
========= ======== ======== ========
Total assets:
United States...................................................... $147,995 $146,329
Mexico (i)......................................................... 2,324 2,348
Europe (ii)........................................................ 1,244 2,998
-------- --------
Total............................................................ $151,563 $151,675
======== ========
</TABLE>
(i) Relates to the Company's trucking operations in Mexico.
(ii) Relates to the Company's discontinued freight forwarding operations based
in the United Kingdom.
Significant Customer:
Revenue from Chrysler accounted for approximately 36% and 42% of the
Company's truckload revenue for the three months ended December 31, 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 December 31, 1997 and 29% and 71%,
respectively, for the three months ended December 31, 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 movements was extended for three years and now expires
October 1, 2000. No other customer accounted for more than 5% of the Company's
revenue during any of its three most recent fiscal years.
8
<PAGE>
<PAGE>
CELADON GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 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 the six months
ending December 31, 1997 and 1996 were 38.4% 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 December
31, 1997, the Company had contracts to purchase fuel for future physical
delivery in the month of January 1998 through May 1998. These contracts
represent approximately 21% 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 December 31, 1997, liquidation
of outstanding transactions, not designated as hedges, which extended through
August 1998 and covered approximately 78% during January 1998 through April
1998, 43% during May and June 1998 and an average of 22% in July and August 1998
of the Company's fuel requirements, would have resulted in a $298 thousand loss.
Transactions designated as hedges and therefore not marked-to-market value had a
negative value of $99 thousand. 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 December 31, 1997 and
1996, losses of $387 thousand and $15 thousand, respectively, on futures
contracts and commodity collar transactions were shown as an increase in fuel
expense. For the six months ended December 31, 1997, net losses of $209 thousand
on futures contracts and commodity collar transactions were included as an
increase to fuel expense and for the six months ended December 31, 1996 net
gains of $153 thousand on physical delivery and futures contracts and commodity
collar transactions were included as a reduction of fuel expense. To the extent
the Company hedges portions of its fuel purchases, it may not fully benefit from
decreases in fuel prices.
Standby letters of credit, not reflected in the accompanying condensed
consolidated financial statements, aggregated approximately $2.5 million at
December 31, 1997.
The Company has outstanding commitments to purchase approximately $10.2
million of revenue equipment at December 31, 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
9
<PAGE>
<PAGE>
Petition against representatives of the State of Texas. The state responded and
denied the Company's claims. As of December 31, 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. 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 incidental 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 or results of operations.
(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) COMMON STOCK
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 issuance of 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 December 31, 1997 and 1996, capital lease
obligations in the amount of $8.2 million and $19.3 million, respectively and
for the six months ended December 31, 1997 and 1996, capital lease obligations
in the amount of $15.2 million and $34.0 million, respectively were incurred in
connection with the purchase of, or option to purchase revenue equipment
(including tires in service).
(8) EARNINGS PER SHARE
During the three months ended December 31, 1997, the Company adopted the
provisions of Financial Accounting Standards FAS No. 128, Earnings Per Share.
Accordingly, interim periods ending before December 15, 1997 have been restated
to reflect basic and diluted earnings per share in accordance with this
Standard.
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; changes in fuel prices;
changes in economic, political or regulatory environments; changes in the
availability of a stable labor force; the 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 DECEMBER 31, 1997 COMPARED WITH THE THREE MONTHS ENDED
DECEMBER 31, 1996
Revenue. Consolidated revenue from continuing operations of the Company
increased by $10.1 million, or 22%, to $56.8 million for the three months ended
December 31, 1997 (the "1997 period") from $46.7 million for the three months
ended December 31, 1996 (the "1996 period"). Revenue from the truckload division
which includes the Company's Mexican Subsidiary ("Jaguar") increased by $9.6
million, or 23%, to $50.7 million in the 1997 period from $41.1 million in the
1996 period. This increase is a result of a volume increase primarily in the
demand for the Company's transportation services between the United States and
Mexico in addition to the revenue generated from the General Electric Transport
Services ("GETS") division acquired in September 1997. Additionally, billings
for trailer detention and demurrage increased $0.4 million over the 1996 period
and billings to customers for purchased transportation in Mexico increased $1.3
million over the 1996 period. The number of tractors operated by the Company's
U.S. truckload operation in over-the-road service rose to 1,308 at December 31,
1997 compared to 1,200 at December 31, 1996 excluding 49 tractors operated by
the Company's Mexican affiliate in both periods. Owner-operated tractors
increased from 4 to 183 between December 1996 to December 1997, primarily
as a result of the GETS acquisition.
Revenue for Jaguar increased by $0.9 million, or 75%, to $2.1 million in
the 1997 period from $1.2 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 $0.5 million, or 9%, to $6.2
million for the 1997 period from $5.7 million for the 1996 period. The increase
is primarily due to the number of owner-operated tractors in Cheetah's network
which increased to 276 at December 31, 1997 from 260 at December 31, 1996.
Operating income. The truckload division operating income was $3.2
million in both the 1997 and 1996 periods. The operating ratio for the truckload
division, which is the percentage of operating expenses to its revenue,
increased to 93.8% in the 1997 period from 92.4% in the 1996 period. The 1997
operating ratio was impacted by 0.7 of a percentage point due to a decline in
value of heating oil financial contracts acquired by
11
<PAGE>
<PAGE>
the Company as part of its fuel price management program. The 1997 operating
ratio was also impacted by 0.7 of a percentage point due to excess idle
equipment which the Company estimates cost approximately $360 thousand in the
1997 period. The increase in the number of owner-operated tractors also
increased the operating ratio. In the 1997 period, the truckload division
payments to owner-operators included in rent and purchased transportation
expense of $5.7 million, an increase of $5.6 million, was principally due to the
acquisition of GETS in September 1997. Charges for purchased transportation
services relating to transportation in Mexico also increased $1.2 million
over the 1996 period. Average fuel cost per gallon decreased by $0.05 in
the 1997 period compared with the 1996 period. This cost decrease includes
realized losses of $387 thousand attributable to the Company's fuel price
management program.
The Company's flatbed division operating ratio improved to 93.2% in the
1997 period from 94.3% in the 1996 period. This ratio 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. This improvement was primarily due to
the flatbed division's overhead and fixed operating expenses not increasing as
rapidly as the revenue increase. In the 1997 period, the flatbed division
payments to owner-operators of $4.7 million, an increase of $0.4 million on
higher volume are included in rent and purchased transportation expense and
payments to brokers of $0.4 million, in both periods, are included in selling
expense.
Interest expense/income. Interest expense remained constant at $1.4
million in both the 1997 and 1996 periods which was due to a comparable amount
of outstanding borrowings in both periods. The Company recognized $0.3 million
of interest income in the 1997 period which included approximately $0.2 million
related to interest income on federal income tax refunds received due to the
carry back of losses on discontinued operations.
Income taxes. The effective tax rates for the December 31, 1997 and 1996
periods were 37.7% and 40% respectively. The lower effective tax rate during the
1997 period is principally due to lower estimated state tax expense.
SIX MONTHS ENDED DECEMBER 31, 1997 COMPARED WITH THE SIX MONTHS ENDED DECEMBER
31, 1996
Revenue. Consolidated revenue from continuing operations of the Company
increased by $15.7 million, or 17%, to $108.7 million for the six months ended
December 31, 1997 (the "1997 period") from $92.9 million for the six months
ended December 31, 1996 (the "1996 period"). Revenue from the truckload division
which includes the Company's Mexican Subsidiary ("Jaguar") increased by $13.8
million, or 17%, to $96.1 million in the 1997 period from $82.3 million in the
1996 period. This increase was primarily a result of a volume increase in the
demand for the Company's transportation services between the United States and
Mexico, a 5% increase in overall rates per mile and the addition to revenue
generated from the General Electric Transport Services ("GETS") division
acquired in September 1997. Additionally, billings for trailer detention and
demurrage increased $0.5 million over the 1996 period and billings to customers
for purchased transportation in Mexico increased $1.8 million over the 1996
period. The number of tractors operated by the Company's U.S. truckload
operation in over-the-road service rose to 1,308 at December 31, 1997
compared to 1,200 at December 31, 1996 in both cases excluding 49 tractors
operated by the Company's Mexican affiliate in both periods. Owner-operated
tractors increased from 4 to 183 between December 1996 to December 1997
primarily as a result of the GETS acquisition.
Revenue for Jaguar increased by $1.8 million, or 82%, to $4.0 million in
the 1997 period from $2.2 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.
12
<PAGE>
<PAGE>
Revenue from the flatbed division increased by $1.9 million, or 18% to
$12.6 million in the 1997 period from $10.7 million in the 1996 period,
primarily as a result of increasing the network of owner-operated tractors to
276 at December 31, 1997 from 260 at December 31, 1996.
Operating income. The truckload division operating income increased by
$1.5 million, or 28%, to $6.9 million in the 1997 period from $5.4 million in
the 1996 period. The operating ratio for the truckload division, which is the
percentage of operating expenses to its revenue, improved to 92.8% in the 1997
period from 93.4% in the 1996 period. This improvement was principally
attributable to the increase in net rate per mile noted above partially offset
by cost increases. Average fuel cost per gallon decreased by $0.06 in the 1997
period compared with the 1996 period. This cost decrease is net of realized
losses attributable to the Company's fuel price management program, of $209
thousand, or $0.015 per gallon. In addition, costs associated with the larger
tractor fleet partially offset the benefits of the price increases. The
improvement 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. In the 1997 period, the truckload division payments to
owner-operators included in rent and purchased transportation expense of $7.7
million, an increase of $7.6 million, was principally due to the acquisition of
GETS in September 1997. Charges for purchased transportation services relating
to transportation in Mexico also increased $1.7 million over the 1996 period.
The Company's flatbed division operating ratio improved to 94.7% in the
1997 period from 95.2% in the 1996 period. This ratio 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. This improvement was primarily due to
the flatbed division's overhead and fixed operating expenses not increasing as
rapidly as the revenue increase. In the 1997 period, the flatbed division
payments to owner-operators of $9.8 million, an increase of $1.6 million on
higher volume are included in rent and purchased transportation expense and
payments to brokers of $0.9 million, an increase of $0.1 million, are included
in selling expense.
Interest expense/income. Interest expense increased by $0.3 million, or
13%, to $2.8 million in the 1997 period from $2.4 million in the 1996 period, as
a result of higher average outstanding borrowings primarily in the first quarter
of the 1997 period. The Company recognized $0.3 million of interest income in
the 1997 period which included approximately $0.2 million related to interest
income on federal income tax refunds received due to the carry back of losses on
discontinued operations.
Income taxes. The effective tax rates for the December 31, 1997 and 1996
periods were 38.4% and 40% respectively. The lower effective tax rate during the
1997 period is principally due to lower estimated state tax expense.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary capital requirements in fiscal 1998 have been
funding the acquisition of revenue equipment for the trucking division. These
requirements have been met primarily by equipment leasing arrangements. At
December 31, 1997, the Company had a credit facility of $30.0 million from its
banks, of which $8.7 million was utilized as outstanding borrowings, and $2.5
million was utilized for standby letters of credit. The average balance
outstanding during the six months was $10.3 million and the highest balance
outstanding was $17.6 million.
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 7.82% at December 31, 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.
13
<PAGE>
<PAGE>
The trucking division has financed some of its capital requirements by
obtaining lease financing and notes payable on revenue equipment. At December
31, 1997, the Company had an aggregate of $63.2 million in such financing at
interest rates ranging from 5.7% to 10.6%, maturing at various dates through
2004. Of this amount, $13.5 million is due within one year.
As of December 31, 1997, the Company had on order revenue equipment
representing an aggregate capital commitment of $10.2 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 at December 31, 1997, decreased
$0.4 million to $27.3 million from $27.7 million at June 30, 1997. The net
decrease represented a $1.6 million increase in the truckload division, a $0.5
million decrease in the flatbed division and a $1.5 million decrease related to
the winddown of discontinued operations. The increase in accounts receivable for
the truckload division reflects the GETS operation acquired in September 1997
which had receivables of $3.3 million at December 31, 1997 compared with $5.3
million included in the assets originally acquired.
The Company purchases fuel contracts from time-to-time for a portion of
its projected fuel needs. At December 31, 1997, the Company had contracts to
purchase for future delivery approximately 21% of its fuel requirements through
May 1998. Contract prices are approximately 5% over December 31, 1997 market
prices for future delivery. The Company does not believe that these price levels
will have a material adverse effect on its results of operations. The Company's
fuel price management program has not adversely impacted the Company's
liquidity.
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.
14
<PAGE>
<PAGE>
YEAR 2000
The Company recognizes the potential problems for many computer systems
and the users relating to the Year 2000. The preponderance of the Company's
systems are purchased from outside vendors. The Company has assessed its primary
systems and believes that virtually all of the systems are Year 2000 compliant.
Those installed systems which are not currently able to fully function in the
Year 2000 either have new versions which are Year 2000 compliant and which the
Company is preparing to install on the system, or the vendor has committed to a
Year 2000 compliant release in sufficient time to allow installation and testing
prior to critical cut over dates. Consequently, the Company presently does not
anticipate either a significant amount of incremental expense or a disruption in
service associated with the Year 2000 and its impact on the Company's computer
systems.
15
<PAGE>
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Celadon Group, Inc. held its regular Annual Meeting of shareholders on
December 1, 1997. Proxies representing 6,853,859 shares of Common Stock or
89.91% of the total outstanding shares voted as follows:
Proposal I - Elections of Directors
Voted For Vote Withheld
--------- -------------
Stephen Russell 6,850,787 3,072
Paul A. Biddelman 6,851,057 2,802
Michael Miller 6,850,557 3,302
Kilin To 6,851,057 2,802
Joel E. Smilow 6,844,057 9,802
Proposal II - Approval and adoption of Celadon Group, Inc. Non-Employee Director
Stock Option Plan
For 6,539,181
Against 208,246
Abstain 7,175
Broker Non-votes 99,257
Proposal III - Approval of Amendment to the Celadon Group, Inc. 1994 Stock
Option Plan (i)
For 5,832,442
Against 890,977
Abstain 7,279
Broker Non-votes 103,157
Proposal IV - Ratification of appointment of Ernst & Young LLP as Auditors
For 6,842,354
Against 10,597
Abstain 908
(i) Among other things, the approved amendment increased from 500,000 to
650,000, the number of shares of common stock that may be subject to
options, stock appreciation rights and restricted stock awards that may be
granted under the 1994 Stock Option Plan.
16
<PAGE>
<PAGE>
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8K
(a) Exhibits
Exhibit 10.3 1994 Stock Option Plan of the Company.
Incorporated by reference to Exhibit B to the
Company's Proxy Statement dated October 17, 1997.
Exhibit 10.52 Seventh amendment dated December 16, 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 10.53 Celadon Group, Inc. Non-Employee Director Stock
Option. Incorporated by reference to Exhibit A
to the Company's Proxy Statement dated
October 17, 1997.
Exhibit 10.54 Amendment No. 2 dated August 1, 1997 to Employment
Agreement dated January 21, 1994 between the
Company and Stephen Russell.
Exhibit 11 Computation of per share earnings
Exhibit 27 Financial Data Schedule
(b) Form 8-K None
17
<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: February 11, 1998
18
<PAGE>
<PAGE>
EXHIBIT 10.52
SEVENTH AMENDMENT TO CREDIT AGREEMENT
THIS SEVENTH AMENDMENT TO CREDIT AGREEMENT, dated as of December
16, 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") and NBD BANK, N.A., a national banking association,
assignee of NBD Bank, as co-agent for the Banks ("Co-Agent A").
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, a Fifth Amendment to Credit Agreement dated as of June 30, 1997 and a
Sixth Amendment to Credit Agreement dated as of August 28, 1997 (as amended, the
"Credit Agreement").
B. Simultaneously with the execution and delivery of this
Amendment, BankBoston, N.A., a Bank and Co-Agent B under the Credit Agreement,
will be assigning all of its interests in the Credit Agreement to the Banks set
forth on the signature pages hereof and resigning as Co-Agent B under the Credit
Agreement pursuant to an Assignment and Acceptance dated as of the date hereof
executed by the Companies, the Co-Agent A, the Banks and BankBoston, N.A, as a
Bank and as Co-Agent B (the "Assignment"). The Companies have requested that the
Co-Agent A and the Banks make certain amendments to the Credit Agreement to,
among other things, reflect such assignment and resignation, and the Co-Agent A
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) Any and all references to "Co-Agent A" or "Co-Agents"
shall be deleted and replaced with the term "Agent" which shall be defined
as set forth below and any and all references to "Co-Agent B" shall be
deleted:
1
<PAGE>
<PAGE>
"Agent" shall mean NBD Bank, N.A., a national banking
association, together with its successors and
assigns.
(b) The definition of "Indebtedness" in Section 1.1 shall be
amended by adding the following language at the end thereof: "provided, however,
that in calculating "Indebtedness" in connection with the covenants set forth in
Sections 5.2(b), (c) and (d), an amount shall be deducted from the aggregate
amount of such Indebtedness equal to the balance of the Investment Account at
the time of such calculation".
(c) New definitions of "Bank Indebtedness", "Investment Account",
and "Swaps" shall be added to Section 1.1 in appropriate alphabetical order as
follows:
"Bank Indebtedness" shall mean (a) the Advances and
all other indebtedness, obligations and liabilities
of the Companies to the Agent or any Bank under any
Loan Document and (b) all indebtedness, obligations
and liabilities of any Company to any Bank in respect
of Swaps.
"Investment Account" shall mean the account known as
the Celadon Repo Transfer Account maintained by CG
with NBD Bank, N.A.
"Swaps" shall mean any interest rate or currency
swaps, rate caps, commodity swaps or similar
transactions, provided that such transactions are
entered into by any Company or any of its
Subsidiaries to protect against fluctuations in
interest rates on Indebtedness of the Company and its
Subsidiaries or in exchange rates, and not for
speculative purposes.
(d) The definition of "Required Banks" shall be amended by
deleting the references set forth therein to "51%" and inserting "65%" in place
thereof.
(e) Section 5.2(a) shall be deleted in its 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) $32,500,000,
commencing on September 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 December
31, 1997 plus (C) an amount equal to 80% of the
proceeds received in connection with the offering of
any securities of any Company, other than any
proceeds received by any Company in connection with
the exercise of stock options so long as the
2
<PAGE>
<PAGE>
stock delivered by any Company in connection with the
exercise of such option is not newly issued stock of
such Company.
(f) Section 5.2(j) shall be amended by adding the following
language at the end thereof: "provided, further, that if no Default or Event of
Default shall exist or shall have occurred and be continuing, CG may repurchase
capital stock of CG on the open market in an aggregate amount not to exceed the
sum of $1,000,000 plus any repurchases by CG of CG capital stock for the purpose
of providing for the exercise of stock options".
(g) A new Section 6.3 shall be added at the end of Article VI to
read as follows:
6.3 Distribution of Proceeds of Collateral. All
proceeds of any realization on the collateral
pursuant to the Security Documents and any payments
received by the Agent subsequent to and during the
continuance of any Event of Default, shall be
allocated and distributed by the Agent as follows:
(a) First, to the payment of all reasonable costs
and expenses, including without limitation all
reasonable attorneys' fees, of the Agent in
connection with the enforcement of the Security
Documents and otherwise administering this Agreement;
(b) Second, to the payment of all fees required
to be paid under any Loan Document or any document or
agreement executed in connection with the Swaps,
including commitment fees, owing to the Banks and
Agent pursuant to the Bank Indebtedness on a pro rata
basis in accordance with the Bank Indebtedness
consisting of fees owing to the Banks and Agent under
the Bank Indebtedness, for application to payment of
such liabilities;
(c) Third, to the Banks and Agent on a pro rata
basis in accordance with the Bank Indebtedness
consisting of interest owing to the Banks and Agent
under the Bank Indebtedness, and obligations and
liabilities relating to Swaps owing to the Banks and
the Agent under the Bank Indebtedness for application
to payment of such liabilities;
(d) Fourth, to the Banks and the Agent on a pro
rata basis in accordance with the Bank Indebtedness
consisting of principal (including without limitation
any cash collateral for any outstanding letters of
credit), for application to payment of such
liabilities;
3
<PAGE>
<PAGE>
(e) Fifth, to the payment of any and all other
amounts owing to the Banks and the Agent on a pro
rata basis in accordance with the total amount of
such Indebtedness owing to each of the Banks and the
Agent, for application to payment of such
liabilities; and
(f) Sixth, to the Companies, their Subsidiaries
or such other Person as may be legally entitled
thereto.
(h) In connection with the Assignment, the
"Commitment Amount" and "Percentage of Total
Commitments" set forth on the signature pages next to
the name of each Bank shall be deleted and the
following shall be inserted in place thereof:
Commitment Amount Percentage of
Total Commitments
----------------- -------------------
NBD Bank, N.A. $17,500,000 58.3%
KeyBank National
Association $12,500,000 41.7%
A. Total Commitment Amount of all Banks $30,000,000
B.
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-Agent A 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.
4
<PAGE>
<PAGE>
(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:
(a) The Assignment shall have been executed by all parties
thereto and delivered to the Co-Agent A;
(b) The Companies shall have executed and delivered Revolving
Credit Notes to the Banks reflecting the Commitment Amounts set forth in the
Assignment; and
(c) The Companies shall have executed and delivered the First
Amendment to Security Agreement and such other documents and agreements as the
Agent or any Bank may reasonably request.
5. Each Company agrees to pay and save Co-Agent A 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, in connection with the
preparation and review of this Amendment, the Assignment 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.
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.
5
<PAGE>
<PAGE>
CELADON GROUP, INC.
By: /s/ Don S. Snyder
----------------------------
Its: EVP - Chief Financial Officer
---------------------------------
CELADON TRUCKING SERVICES, INC.
By: /s/ Don S. Snyder
----------------------------
Its: EVP - Chief Financial Officer
---------------------------------
NBD BANK, N.A., assignee of NBD Bank, individually
and as Co-Agent A
By: /s/ Scott Morrison
----------------------------
Its: Vice President
-------------------------
KEYBANK, NATIONAL ASSOCIATION
By: /s/ J. H. Rohs
--------------------------
Its: Vice President
-------------------------
6
<PAGE>
<PAGE>
EXHIBIT 10.54
Stephen Russell
Employment Agreement
Amendment No. 2
Amendment No. 2, dated as of August 1, 1997, to the employment agreement
dated as of January 21, 1994 between Celadon Group, Inc., a Delaware corporation
(the "Company"), and Stephen Russell ("Employee"), as amended by the amendment
dated as of February 12, 1997 (the "Employment Agreement").
The parties wish to amend the Employment Agreement as set forth below.
Accordingly, the parties agree as follows:
1. Term. Section 1 of the Employment Agreement is hereby amended to
substitute the date "January 21, 2001" for the words "four years from the
Commencement Date".
2. Salary. The second sentence of section 3(a) of the Employment
Agreement is hereby deleted and replaced by the following:
"Effective on January 21, 1998 and on each subsequent anniversary of the
Commencement Date during the Employment Period, such salary shall be
increased by a percentage equal to the percentage difference between the
national Consumer Price Index (the "CPI-U") for the year ended the
immediately preceding December 31st and the CPI-U for the year ended the
second preceding December 31st."
3. Bonus. The first and second sentences of section 3.5(b) of the
Employment Agreement are hereby deleted and replaced by the following:
"For the fiscal year ending June 30, 1998, and for each subsequent
fiscal year during the Employment Period, Employee shall be entitled to
participate in an incentive bonus program designed for the members of
the Company's senior management. Pursuant to such program, Employee may
receive a bonus in an amount equal to between 0% and 105% of his base
salary, as determined by the Compensation Committee of the Company's
Board of Directors (the "Compensation Committee") based upon the
Compensation Committee's analysis of the Company's performance as
compared with goals which shall be established annually by the
Compensation Committee. Any such bonus shall be subject to such
withholding taxes and other amounts as may be required by law."
4. Stock Options. Options to acquire 25,000 shares of common stock, par
value $.033 per share, of the Company, which were granted to Employee on
September 9, 1994, shall be exercisable at a price of $12.00 per share.
7
<PAGE>
<PAGE>
5. Notices. Section 14 of the Employment Agreement is hereby amended to
substitute "as follows:
in the case of the Company, to
Celadon Group, Inc.
9503 E. 33rd Street
Indianapolis, IN 46236
in the case of the Employee, to
Mr. Stephen Russell
21 Cherry Valley Road
Greenwich, CT 06831"
for the words "in the preamble to this Agreement".
6. Agreement Otherwise Unchanged. The Employment Agreement, as so
amended, shall remain in full force and effect.
7. Counterparts. This amendment may be executed in counterparts, each
of which shall be deemed an original, but both of which together shall
constitute the same agreement.
CELADON GROUP, INC.
By: /s/ Don S. Snyder
-----------------
Name: Don S. Snyder
Title: Executive Vice President
Executive:
/s/ Stephen Russell
-------------------------
Stephen Russell
<PAGE>
<PAGE>
EXHIBIT 11
CELADON GROUP, INC.
COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED FOR THE SIX MONTHS ENDED
DECEMBER 31, DECEMBER 31,
-------------------------- ------------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Numerator:
Net income................... $1,513,000 $1,274,000 $3,185,000 $2,171,000
---------- ---------- ---------- ----------
Numerator for basic and
diluted earnings per share... $1,513,000 $1,274,000 $3,185,000 $2,171,000
Denominator:
Denominator for basic earnings
per share-weighted-average shares 7,648,583 7,628,189 7,635,582 7,633,955
Effect of dilutive securities:
Employee stock options....... 99,357 12,960 83,289 6,800
Warrants..................... 3,130 9.889 10,696 6,484
--------- -------- ------- -------
Dilutive potential common shares 102,487 22,849 93,985 13,284
Denominator for diluted earnings
per share-adjusted weighted-
average shares and assumed
conversions.............. 7,751,070 7,651,038 7,729,567 7,647,239
========= ========= ========= =========
Basic earnings per share..... $0.20 $0.17 $0.42 $0.28
===== ===== ===== =====
Diluted earnings per share... $0.20 $0.17 $0.41 $0.28
===== ===== ===== =====
<PAGE>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
condensed consolidated balance sheet of Celadon Group, Inc. at December 31, 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> DEC-31-1997
<CASH> 1,435
<SECURITIES> 0
<RECEIVABLES> 27,850
<ALLOWANCES> 551
<INVENTORY> 0
<CURRENT-ASSETS> 45,332
<PP&E> 125,472
<DEPRECIATION> (33,490)
<TOTAL-ASSETS> 151,563
<CURRENT-LIABILITIES> 34,226
<BONDS> 74,752
0
0
<COMMON> 257
<OTHER-SE> 48,674
<TOTAL-LIABILITY-AND-EQUITY> 151,563
<SALES> 0
<TOTAL-REVENUES> 56,836
<CGS> 0
<TOTAL-COSTS> 53,265
<OTHER-EXPENSES> 2
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,141
<INCOME-PRETAX> 2,428
<INCOME-TAX> 915
<INCOME-CONTINUING> 1,513
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,513
<EPS-PRIMARY> 0.20
<EPS-DILUTED> 0.20
</TABLE>
