CELADON GROUP INC, 10-K, 2000-09-28

CELADON GROUP INC
10-K, 2000-09-28
ARRANGEMENT OF TRANSPORTATION OF FREIGHT & CARGO

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

FOR THE ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTIONS 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED JUNE 30, 2000

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM _________ TO _________

COMMISSION FILE NUMBER: 0-23192

CELADON GROUP, INC.
(Exact name of Registrant as specified in its charter)

<TABLE>
<S> <C>
DELAWARE 13-3361050
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)

9503 EAST 33RD STREET
INDIANAPOLIS, IN 46235
(Address of principal executive offices) (Zip Code)
</TABLE>

Registrant's telephone number, including area code: (317) 972-7000
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:

COMMON STOCK ($0.033 PAR VALUE)
SERIES A JUNIOR PARTICIPATING PREFERRED STOCK PURCHASE RIGHTS

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
--- ---

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]

As of September 20, 2000, the aggregate market value of the Common Stock ($0.033
par value) held by non-affiliates of the registrant (3,397,032 shares) was
approximately $33,970,320 (based upon the closing price of such stock on
September 20, 2000). The exclusion from such amount of the market value of the
shares owned by any person shall not be deemed an admission by the registrant
that such person is an affiliate of the registrant. The number of shares
outstanding of the Common Stock of the registrant as of the close of business on
September 20, 2000 was 7,784,878.

Documents Incorporated by Reference

Part III of Form 10-K -- Portions of Definitive Proxy Statement for the 2000
Annual Meeting of Stockholders

<PAGE>

CELADON GROUP, INC
FORM 10-K

TABLE OF CONTENTS

<TABLE>
<CAPTION>
Document and Location
---------------------
<S> <C> <C>
PART I

ITEM 1. Business...................................................................Page 3 herein
ITEM 2. Properties................................................................Page 10 herein
ITEM 3. Legal Proceedings.........................................................Page 10 herein
ITEM 4. Submission of Matters to a Vote of Security Holders.......................Page 10 herein

PART II

ITEM 5. Market for Registrant's Common Equity and Related
Stockholder Matters.....................................................Page 11 herein
ITEM 6. Selected Financial Data...................................................Page 12 herein
ITEM 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations.....................................Page 13 herein
ITEM 7A. Quantitative and Qualitative Disclosures About
Market Risk............................................................Page 18 herein
ITEM 8. Financial Statements and Supplementary Data...............................Page 19 herein
ITEM 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.....................................Page 48 herein

PART III

ITEM 10.
Directors and Executive Officers of the Registrant...............................Page 1 of Proxy Statement
ITEM 11.
Executive Compensation...........................................................Page 5 of Proxy Statement
ITEM 12.
Security Ownership of Certain Beneficial Owners
and Management.................................................................Page 12 of Proxy Statement
ITEM 13.
Certain Relationships and Related Transactions...................................Page 14 of Proxy Statement

PART IV

ITEM 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K.....................................................Page 49 herein

SIGNATURES...........................................................................................Page 53 herein
</TABLE>

<PAGE>

PART I

DISCLOSURE REGARDING FORWARD LOOKING STATEMENTS

The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for forward looking statements. Certain information in Items 1, 3, 7, 7A
and 8 of this Form 10-K constitute forward looking statements within the meaning
of the Private Securities Litigation Reform Act of 1995 and, as such, involve
known and unknown risks, uncertainties and other factors which may cause the
actual results, performance or achievements of the Company to be materially
different from any future results, performance or achievements expressed or
implied by such forward-looking statements. You can identify such statements by
the fact that they do not relate strictly to historical or current facts. These
statements use words such as "believe", "expect", "should" and "anticipate".
Such information includes, without limitation, price and availability of diesel
fuel, availability of an adequate number of qualified drivers, competitive
factors including rate competition, unanticipated changes in laws, regulations,
economic conditions, and weather conditions. Subsequent written and oral forward
looking statements attributable to the Company or persons acting on its behalf
are expressly qualified in their entirety by the cautionary statements in this
paragraph and elsewhere in this Form 10-K.

All such forward-looking statements speak only as of the date of this
Form 10-K. The Company expressly disclaims any obligation or undertaking to
release publicly any updates of revisions to any forward-looking statements
contained herein to reflect any change in the Company's expectations with regard
thereto or any change in events, conditions or circumstances on which any such
statement is based.

ITEM 1. BUSINESS

THE COMPANY

Celadon Group, Inc., was incorporated in 1986, in Delaware, primarily
to provide trucking services for DaimlerChrysler Corporation ("DaimlerChrysler")
to and from its Mexican assembly plants. Since that time, Celadon Group, Inc.
(collectively, with its subsidiaries, the "Company") has grown into a leading
trucking company that specializes in providing and arranging door-to-door
transport services from the United States and Canada to and from locations in
Mexico. The Company also provides van truckload and flatbed transport services
within the United States. The Company acquired (i) the assets of General
Electric Transportation Services ("GETS") in September 1997, (ii) the assets of
Gerth Transport ("Gerth") in May 1998, and (iii) the assets, and assumed certain
liabilities of, Zipp Express, Inc. ("Zipp") in July 1999. See "Management's
Discussion and Analysis of Financial Conditions and Results of Operations -
Recent Acquisitions."

<PAGE>

The Company is headquartered in Indianapolis, Indiana and maintains a
regional network of eight terminals within the Ontario, Canada to Laredo, Texas
corridor and four terminals within Mexico, which enables the Company to focus
primarily on north-south trucking lanes. The Company currently operates a fleet
of approximately 2,500 tractors and 7,000 trailers.

On February 9, 2000, the Company incorporated TruckersB2B, Inc.
("TruckersB2B"), an internet-based "business-to-business" membership program
providing discounted fuel, tires and other products and services to small and
medium-sized trucking companies through its website. TruckersB2B is a subsidiary
of the Company as a majority of TruckersB2B's common stock is owned by Celadon
E-Commerce, Inc., a wholly-owned subsidiary of the Company.

INDUSTRY OVERVIEW

The full truckload market is defined by the quantity of goods,
generally over 10,000 pounds, shipped by a single customer and is divided into
several segments by the type of trailer used to transport the goods. These
segments include van, temperature-controlled, flatbed, and tank carriers. The
Company participates primarily in the van and, to a lesser degree, the flatbed
portion of the North American truckload market. The markets within the United
States, Canada, and Mexico are fragmented, with many competitors.

Transportation of goods by truck between the United States, Canada, and
Mexico is subject to the provisions of the North American Free Trade Agreement
("NAFTA"). United States and Canadian based carriers may operate within both
countries. United States and Canadian carriers are not allowed to operate within
Mexico, and Mexican carriers are not allowed to operate within the United States
and Canada, in each case except for a 26 kilometer band along either side of the
Mexican border. Trailers may cross the Mexican border.

Transportation of goods between the United States or Canada and Mexico
consists of three components: (i) transport from the point of origin to the
Mexican border, (ii) drayage, which is transportation across the border, and
(iii) transportation from the border to the final destination. The Company is
one of a limited number of trucking companies that participates in all three
segments of this cross border market providing true door-to-door carriage.

Internet-based business-to-business savings programs for trucking
companies is new and includes such competitors as other large trucking
companies, other Internet-based buying programs, trucking industry co-ops and
other possible new entrants.

OPERATIONS AND MARKETING

The Company approaches its operations as an integrated effort of
marketing, customer service, and fleet management. The Company's customer
service and marketing personnel emphasize both new account development and
expanded service for current customers. Customer service representatives provide
day-to-day contact with customers, while the sales force targets freight that
will increase lane density.

<PAGE>

The Company provides and arranges for long-haul, time sensitive, full
truckload transport of goods between the United States and Canada and Mexico.
The Company provides van truckload carriage through four operating units:
Celadon Trucking Services Inc., ("CTSI"), Zipp, Gerth, and Servicios de
Transportacion Jaguar S.A. de CV ("Jaguar"). Because most international
shipments are carried on through-trailer service on U.S. or Canadian trailers,
Mexican carriers use the Company's trailers. As a result, the Company maintains
an above average trailer-to-tractor ratio. The Company utilized 2,580 tractors
(of which 1,024 were owner-operators) and 7,042 trailers as of June 30, 2000.
The Company provides flatbed carriage through its subsidiary Cheetah
Transportation Company ("Cheetah"), which is headquartered in Mooresville, North
Carolina. Flatbed services are employed for commodities such as steel coils,
lumber and other building materials because of their special loading
requirements and for shipments of large or oversized freight.

The Company targets large service-sensitive customers with
time-definite delivery requirements throughout the United States, Canada and
Mexico. The Company's customers frequently ship in the north-south lanes (i.e.
to and from locations in Mexico to and from locations in the Midwestern and
Eastern United States and Eastern Canada). The sales and marketing personnel in
the various offices work together to source northbound and southbound transport,
in addition to drayage. The Company currently services in excess of 3,500
trucking customers. Service to these customers is enhanced by a high
trailer-to-tractor ratio, state-of-the-art technology, well maintained,
late-model tractors and trailers, and 24-hours a day, seven-days a week dispatch
and reporting services. The principal types of freight transported include
automotive parts, paper products, manufacturing parts, semi-finished products,
textiles, appliances, retail and toys.

The Company's largest customer is DaimlerChrysler, which accounted for
approximately 24%, 25%, and 37% of the Company's total revenue for fiscal 2000,
1999, and 1998, respectively. The Company transports DaimlerChrysler original
equipment automotive parts primarily between the United States and Mexico and
DaimlerChrysler after-market replacement parts and accessories within the United
States. The Company's most recent agreements with DaimlerChrysler are covered by
three agreements: (a) an agreement for international freight with the Chrysler
division, which expires in December 2000, (b) a domestic agreement with the
Chrysler division, which expires in October 2000, and (c) an international
contract with the Freightliner division, which expires in April 2001. The two
Chrysler division agreements accounted for approximately 22%, 22%, and 37% of
the Company's total revenue for fiscal 2000, 1999, and 1998, respectively. The
Freightliner division contract accounted for approximately 2% and 3% of the
Company's total revenue for fiscal 2000 and 1999, respectively. No other
customer accounted for more than 10% of the Company's total revenue during any
of its three most recent fiscal years.

The Company's TruckersB2B subsidiary provides discounted fuel, tires,
and other products and services to small and medium-sized trucking companies
through its website, www.truckersb2b.com. TruckersB2B provides small and
medium-sized trucking company members with the ability to cut costs, and thereby
compete more effectively and profitably with the larger fleets. As of June 30,
2000, TruckersB2B had approximately 158,000 members.

<PAGE>

TECHNOLOGY

The Company uses state-of-the-art technology for customer service,
dispatch, equipment control, driver communications, electronic data interchange
("EDI") and administrative purposes. CTSI, Zipp, Gerth and Jaguar have equipped
all of their tractors with Qualcomm mobile communication terminals, which allow
information to be passed to and from the driver and the Company instantaneously.
Customer order information, load tracking, and service performance are all
monitored using the latest in mobile communication technology. As an extension
of this data capture, customers can track their own shipments utilizing
CelaTrac, an Internet based tracking system that the Company introduced in
August 1998. The Company has implemented Logistics.com load optimization and
drop and swap software modules to further enhance its service performance
levels.

DRIVERS AND PERSONNEL

At June 30, 2000, the Company employed 2,377 persons, of whom 1,532
were drivers, 166 were truck maintenance personnel and 679 were administrative
personnel. None of the Company's drivers or other employees are represented by a
union or a collective bargaining unit.

Driver recruitment, retention, and satisfaction are essential
components of the Company's success. Drivers are selected in accordance with
specific guidelines, relating primarily to safety records, driving experience,
and personal evaluations, including a physical examination and mandatory drug
testing. The Company's drivers attend an orientation program and ongoing driver
efficiency and safety programs. As of June 30, 2000, the average length of time
that drivers had been employed by the Company was approximately 2.3 years.

Historically, the Company utilized owner-operators exclusively for
flatbed shipments. However, with the General Electric Transportation Services
("GETS"), Gerth and Zipp acquisitions, owner-operator capacity was added to the
Company. Owner-operators are independent contractors who, through a contract
with the Company, supply one or more tractors and drivers for Company use.
Owner-operators must pay their own tractor expenses, fuel, maintenance and
driver costs and must meet specified Company guidelines with respect to safety.
As of June 30, 2000, there were 1,024 owner-operator tractors providing 40% of
the Company's tractor capacity.

REVENUE EQUIPMENT

The Company's equipment strategy is to utilize premium late-model
tractors, maintain a high trailer-to-tractor ratio, actively manage equipment
throughout its life cycle and employ a comprehensive service and maintenance
program.

<PAGE>

The Company's fleet is comprised of tractors manufactured by
Freightliner and Peterbilt to the Company's specifications, which the Company
believes helps attract and retain drivers and to minimize maintenance and repair
costs. The Company owns or leases most of its tractors and trailers and, as of
June 30, 2000, utilized 1,024 tractors owned by independent owner-operators.

As of June 30, 2000, the average age of the Company's owned and leased
tractors and trailers was approximately 2.2 years and 3.8 years, respectively.
The Company utilizes a comprehensive maintenance program to minimize downtime
and control its maintenance costs. Centralized purchasing of spare parts and
tires, and centralized control of over-the-road repairs are also used to control
costs. The Company generally replaces its tractors every four to five years,
although it retains some older tractors for use on shorter haul routes
(including drayage) where they can be utilized more economically. The Company
further reduces exposure to declines in the resale value of the Company's
equipment by entering into agreements with certain manufacturers providing for
pre-established resale values upon trade-in of existing equipment.

The following table shows by type and model year the Company's revenue
equipment at June 30, 2000:

<TABLE>
<CAPTION>
Model Year Tractors Trailers
---------- -------- --------
<S> <C> <C>
2000 ............................................ 542 831
1999 ............................................ 166 1,021
1998 ............................................ 221 493
1997 ............................................ 173 234
1996 ............................................ 360 1,821
1995 ............................................ 58 1,142
1994 ............................................ 5 407
1993 ............................................ 18 607
1992 ............................................ 1 332
1991 ............................................ 7 21
Pre-1991 ............................................ 5 133
----- -----
Total ............................................ 1,556 7,042
===== =====
</TABLE>

The Company maintains a 3.1 to 1 trailer-to-tractor ratio (including
van truckload owner-operator equipment) in order to provide availability in
Mexico and to allow it to leave trailers with its high volume shippers to load
and unload at their convenience. As of June 30, 2000, the Company had 159
tractors on order for delivery in fiscal 2001. Additional growth in the tractor
and trailer fleet beyond the Company's existing orders will require additional
sources of financing. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations - Liquidity and Capital Resources."

<PAGE>

FUEL

The Company purchases the majority of its fuel through a network of
approximately 120 fuel stops throughout the United States and Canada. The
Company has negotiated discounted pricing based on certain volume commitments
with these fuel stops. Bulk fueling facilities are maintained in Indianapolis,
Laredo and Kitchener, Ontario to further reduce fuel costs.

Shortages of fuel, increases in fuel prices or rationing of petroleum
products can have a materially adverse effect on the operations and
profitability of the Company. During fiscal year 2000, the Company experienced
significant increases in the cost of fuel. The Company has recovered a portion
of the increased cost from customers via the use of fuel surcharges. However, a
significant portion of the fuel expense increase was not recovered during fiscal
year 2000. This is due to several factors: the base fuel price levels which
determine when surcharges are collected, truck idling, empty miles between
freight shipments, and out-of-route miles caused in part by driver home time
needs. Company management continues to meet with customers to explain the
significant impact of high fuel prices and to improve the amount and percentage
of fuel surcharge reimbursement. However, the Company cannot predict whether
high fuel price levels will continue in the future or the extent to which fuel
surcharges will be collected to offset such increases. At June 30, 2000, the
Company had no derivative financial instruments to reduce its exposure to fuel
price fluctuations.

COMPETITION

While the truckload industry is highly competitive and fragmented, the
Company is one of a limited number of companies that is able to provide or
arrange for door-to-door transport service between points in the United States
and Canada and Mexico. Although both service and price drive competition in the
premium long-haul, time sensitive portion of the market, the Company relies
primarily on its high level of service to attract customers. This strategy
requires the Company to focus on market segments that employ just-in-time
inventory systems and other premium services. Competitors include other
long-haul truckload carriers and, to a lesser extent, medium-haul truckload
carriers and railroads.

<PAGE>

REGULATION

The Company's operations are regulated and licensed by various U.S.
federal and state, Canadian provincial and Mexican federal agencies. Interstate
motor carrier operations are subject to safety requirements prescribed by the
United States Department of Transportation. Such matters as weight and equipment
dimensions are also subject to United States federal and state regulation and
Canadian provincial regulations. The Company operates in the United States
throughout the 48 contiguous states pursuant to operating authority granted by
the Federal Highway Administration, in various Canadian provinces pursuant to
operation authority granted by the Ministries of Transportation and
Communications in such provinces, and within Mexico pursuant to operating
authority granted by Secretaria de Communiciones y Transportes. To the extent
that the Company conducts operation outside the United States, the Company is
subject to the Federal Corrupt Practices Act, which generally prohibits United
States companies and their intermediaries from bribing foreign officials for the
purpose of obtaining or keeping otherwise obtaining favorable treatment.

CARGO LIABILITY, INSURANCE, AND LEGAL PROCEEDINGS

The Company is a party to routine litigation incidental to its
business, primarily involving claims for bodily injury or property damage
incurred in the transportation of freight. The Company is responsible for the
safe delivery of cargo. Since April 2000, the Company is responsible for
liability claims up to $1 million, plus administrative expenses, for each
occurrence involving personal injury or property damage. The Company is self
insuring its physical damage losses and up to $150,000 for workers compensation
losses and up to $25,000 for cargo claims. The Company maintains separate
insurance in Mexico consisting of bodily injury and property damage coverage
with acceptable deductibles. Management believes its uninsured exposure is
reasonable for the transportation industry. Consequently, the Company does not
believe that the litigation and claims experienced will have a material impact
on the Company's financial position or results of operations.

<PAGE>

ITEM 2. PROPERTIES

The Company operates an international network of thirteen terminal
locations, including facilities in Laredo and El Paso, Texas, which are the two
largest inland freight gateway cities between the United States and Mexico.
Operating terminals are currently located in the following cities:

<TABLE>
<CAPTION>
United States Mexico Canada
------------- ------ ------
<S> <C> <C> <C>
Denton, TX Indianapolis, IN (2) Guadalajara Kitchener, ON
Detroit, MI Laredo, TX (2) Mexico City
El Paso, TX Mooresville, NC Monterrey
Nuevo Laredo
</TABLE>

Both the Laredo and Indianapolis facilities include administrative
functions, lounge and sleeping facilities for drivers, parking, fuel and truck
washing facilities. The Company's executive and administrative offices occupy
four buildings located on 30 acres of property in Indianapolis, Indiana.

ITEM 3. LEGAL PROCEEDINGS

See discussion under "Cargo Liability, Insurance, and Legal
Proceedings," and footnote 10 to the consolidated financial statements "Hedging
Activities, Commitments, and Contingencies."

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted for a vote of security holders, through the
solicitation of proxies or otherwise, during the quarter ended June 30, 2000.

<PAGE>

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS

Since January 24, 1994, the date of the initial public offering of the
Company's Common Stock, the Common Stock has been quoted through The Nasdaq
National Market under the symbol "CLDN". The following table sets forth the high
and low reported sales price for the Common Stock as quoted through The Nasdaq
National Market for the periods indicated.

<TABLE>
<CAPTION>
FISCAL 1999 HIGH LOW
<S> <C> <C>
Quarter ended September 30, 1998 $19.38 $ 9.38

Quarter ended December 31, 1998 $15.19 $ 7.00

Quarter ended March 31, 1999 $14.50 $ 7.88

Quarter ended June 30, 1999 $10.50 $ 7.38

FISCAL 2000

Quarter ended September 30, 1999 $ 9.13 $ 6.88

Quarter ended December 31, 1999 $ 9.88 $ 5.25

Quarter ended March 31, 2000 $33.00 $ 5.44

Quarter ended June 30, 2000 $27.75 $10.25
</TABLE>

On September 20, 2000, there were approximately 2,200 holders of the
Company's Common Stock, and the closing price of the Company's Common Stock was
$10.00.

DIVIDEND POLICY

The Company has not paid cash dividends on its Common Stock as a public
company and has no present intention of paying cash dividends on its Common
Stock in the foreseeable future. Moreover, pursuant to its existing credit
agreements, the Company and certain of its subsidiaries may pay cash dividends
only up to certain specified levels and if certain financial ratios are met.

<PAGE>

ITEM 6. SELECTED FINANCIAL DATA

The statement of operations data and balance sheet data presented below have
been derived from the Company's consolidated financial statements and related
notes thereto. The information set forth below should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Company's Consolidated Financial Statements and related
notes thereto.

<TABLE>
<CAPTION>
FISCAL YEAR ENDED JUNE 30,
----------------------------------------------------------
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
(IN THOUSANDS EXCEPT PER SHARE DATA)
Statement of Operations Data :
<S> <C> <C> <C> <C> <C>
Operating revenue......................... $351,569 $281,829 $229,928 $191,035 $166,544

Operating income ......................... $8,844(2) $15,291 $15,804 $12,435 $1,737
Interest expense, net..................... 9,238 7,385 5,905 4,944 3,672
Other expense (income).................... 256 85 (12) (37) 72
Minority interest in subsidiary loss...... (547) -- -- -- --
Loss on disposition....................... 3,266 -- -- -- --
-------- ------- -------- --------- ---------
Income (loss) from continuing operations
before income taxes................... (3,369) 7,821 9,911 7,528 (2,007)
Provision for income taxes (benefit)...... (1,328) 2,980 3,902 3,024 (411)
-------- ------- -------- --------- ---------
Income (loss) from continuing operations.. (2,041) 4,841 6,009 4,504 (1,596)
Loss from discontinued operations......... -- -- -- -- (15,203)
-------- ------- -------- --------- ---------
Net income (loss)...................... $(2,041) $ 4,841 $ 6,009 $ 4,504 $(16,799)
======== ======= ======== ========= ==========
Diluted Earnings (Loss) Per Share:
Continuing operations.................. $(0.26) $0.62 $0.78 $0.59 $(0.20)
Discontinued operations................ -- -- -- -- (1.93)
-------- ------- -------- -------- ---------
Net income (loss) (1).................. $(0.26) $0.62 $0.78 $0.59 $(2.13)
======== ======= ======== ======== =========
Average diluted shares outstanding........ 7,890 7,784 7,752 7,660 7,877
Balance Sheet Data:
Working capital........................ $22,087 $20,115 $18,027 $16,435 $17,039
Total assets........................... 215,322 188,759 194,777 142,902 141,921
Long-term debt......................... 92,659 71,580 82,843 54,361 50,025
Stockholders' equity................... 58,407 57,306 52,322 45,794 41,962
</TABLE>
------------
(1) Calculation of diluted net income (loss) per common share for the 1996 and
2000 periods are anti-dilutive.
(2) Includes operating loss of $4.7 million related to TruckersB2B.

<PAGE>

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

OVERVIEW

The Company is a leading trucking company that specializes in providing
and arranging truckload transport services from the United States and Canada to
and from locations in Mexico. The Company serves a diverse set of industries
including automotive, technology, industrial equipment, textiles, retail, and
furniture. The Company provides its customers with long-haul time sensitive
transportation utilizing a network of company owned and leased tractors and, to
a lesser extent, independent owner-operators.

The Company's capacity mix has changed with the acquisitions of GETS,
Gerth and Zipp. Prior to these acquisitions, 82% of the Company's capacity was
provided by Company owned and leased equipment. As of June 30, 2000,
owner-operators provided 40% of the Company's capacity. As a result, purchased
transportation expense has increased and equipment ownership costs, maintenance,
and driver expenses have decreased as percentages of operating revenue.

During 2000, the Company has added an Internet-based
"business-to-business" membership program providing discounts on fuel, tires and
other services.

RECENT ACQUISITIONS

In September 1997, the Company acquired the assets of GETS for $8.2
million. The purchase included 150 owner-operator tractors, 455 trailers and a
contract granting the right of first refusal on all loads shipped for General
Electric Industrial Control Systems ("GEICS") for a five-year period. In
addition to adding GEICS as a key customer, the GETS acquisition improved
shipping density of the Company's core routes. The assets acquired in the GETS
acquisition were successfully integrated into CTSI within six months of the date
of acquisition.

In May 1998, the Company acquired the assets of Gerth for $13.8
million. Gerth is a leading Canadian truckload carrier to Mexico, with 425
tractors. This acquisition has strengthened the Company's presence in Canada and
provides additional density in its core north-south transport lanes.

<PAGE>

Effective July 1, 1999, the Company acquired the assets and assumed
certain liabilities of Zipp for approximately $26 million. The consolidated
financial statements include the results of Zipp's operations from the date of
acquisition. The Company believes that Zipp will further strengthen its position
in the market between the U.S. and Mexico as well as within the Midwest region.
Zipp is a major carrier to and from Mexico and also maintains a strong base of
business in the Midwest. In calendar year 1998, Zipp had $38 million in revenue
and an operating ratio of 89.8%. At the acquisition date, Zipp operated a
relatively new fleet of approximately 270 tractors and 800 trailers. As a result
of this acquisition, the Company disposed of a group of its own older equipment
and related items that were no longer required due to the acquired fleet having
newer more fuel efficient equipment. The combined fleets resulted in operating
efficiencies that allowed the Company to dispose of this excess equipment. The
effect of upgrading the Company's fleet through this disposition resulted in a
non-cash charge of approximately $3.3 million in the three months ended
September 30, 1999.

RESULTS OF OPERATIONS

The following table includes certain information with respect to the
operating revenue, operating profit, operating ratio, and operating expense of
the Company for the years indicated.

<TABLE>
<CAPTION>
FISCAL YEAR ENDED JUNE 30,
-------------------------------------------
2000 1999 1998
---- ---- ----
<S> <C> <C> <C>
Operating ratio........................................... 97.5% 94.6% 93.1%

Operating expenses as a percentage of operating revenue:
Salaries, wages and employee benefits................ 27.5% 27.0% 30.4%
Fuel................................................. 10.5% 9.5% 12.8%
Operating costs and supplies......................... 7.7% 9.3% 8.3%
Insurance and claims................................. 2.7% 2.6% 2.8%
Depreciation and amortization........................ 4.1% 4.7% 5.6%
Rent and purchased transportation.................... 37.8% 34.6% 26.7%
General, administrative, and selling expenses........ 2.9% 3.0% 2.7%
Non-cash member and vendor development costs......... 0.8% -- --
Other operating expenses............................ 3.5% 3.9% 3.8%
----- ----- -----
Total............................................ 97.5% 94.6% 93.1%
===== ===== =====
</TABLE>

The operating ratio excluding TruckersB2B was 96.1% in fiscal 2000.

FISCAL YEAR ENDED JUNE 30, 2000 COMPARED WITH FISCAL YEAR ENDED JUNE 30, 1999

REVENUE. Consolidated revenue increased by $69.8 million, or 24.8%, to
$351.6 million for fiscal 2000 from $281.8 million for fiscal 1999. A
significant portion of the increase, $49.5 million, relates to Zipp, which was
acquired effective July 1, 1999. In addition, the Company increased its overall
rates per mile by 3.5% compared to fiscal 1999. This increase in rates reflects
price increases

<PAGE>

obtained by the Company through its continued efforts to focus on its core
routes as well as an improvement in the Company's overall business mix.

OPERATING INCOME. Operating income, excluding TruckersB2B, decreased by
$1.8 million, or 11.8%, to $13.5 million in fiscal 2000 from $15.3 million in
fiscal 1999. The Company's operating ratio, which expresses operating expenses
as a percentage of operating revenue, excluding TruckersB2B, increased from
94.6% in fiscal 1999 to 96.1% in fiscal 2000.

The decrease in operating income and the increased operating ratio were
attributable to a significant increase in fuel costs, net of fuel surcharges, of
approximately $5.8 million, or $.45 (tax effected) per diluted common share. The
Company has recovered a portion of the increased cost from customers via the use
of fuel surcharges. However, a significant portion of the fuel expense increase
was not recovered during fiscal year 2000. This is due to several factors: the
base fuel price levels which determine when surcharges are collected, truck
idling, empty miles between freight shipments, and out-of-route miles caused in
part by driver home time needs. Company management continues to meet with
customers to explain the significant impact of high fuel prices and to improve
the amount and percentage of fuel surcharge reimbursement.

Rent and purchased transportation expense increased as a result of
growth in owner-operator capacity, higher equipment costs, and an increased use
of independent Mexican carriers. This increase was partially offset by a
decrease in depreciation expense and operating costs as a percentage of revenue.

TruckersB2B accounted for a $4.7 million operating loss for fiscal year
2000. This loss was primarily the result of non-cash charges related to the fair
value of shares of TruckersB2B common stock earned by its strategic partners.
TruckersB2B also incurred $2.0 million of pre-tax operating losses for salaries,
advertising and other costs associated with the start-up of a new business.
Those losses were offset by a benefit of $0.5 million for the Company's minority
interest in the TruckersB2B subsidiary.

It is expected that the operating expenses of TruckersB2B will continue
to increase in the near future. This increase will include anticipated non-cash
charges to be recognized in connection with the future issuance of shares of
TruckersB2B Class A common stock, under agreements with certain o its vendor
partners. Upon issuance of these shares, the fair value of the common stock at
the date the shares are earned will be recognized as an operating expense in the
company's consolidated statement of operations.

NET INTEREST EXPENSE. Net interest expense increased by $1.8 million,
or 24.3%, to $9.2 million in fiscal 2000 from $7.4 million in fiscal 1999. The
increase was the result of higher borrowings under the Company's existing credit
facility due to the Zipp acquisition, partially offset by reduced borrowings
under capital leases.

<PAGE>

INCOME TAXES. Income taxes resulted in a benefit of $1.3 million in
fiscal 2000 compared to an expense of $3.0 million in fiscal 1999. This change
in income taxes is a result of the Company's pre-tax loss in fiscal 2000.

FISCAL YEAR ENDED JUNE 30, 1999 COMPARED WITH FISCAL YEAR ENDED JUNE 30, 1998

REVENUE. Consolidated revenue increased by $51.9 million, or 22.6%, to
$281.8 million for fiscal 1999 from $229.9 million for fiscal 1998. This
increase was principally attributable to a $44.4 million increase in Gerth
revenue which was acquired in May 1998. In addition, the Company increased its
overall rates per mile by 2% compared to fiscal 1998. This increase in rates
reflects price increases obtained by the Company through its continued efforts
to focus on its core routes as well as an improvement in the Company's overall
business mix.

OPERATING INCOME. Operating income decreased by $0.5 million, or 3.2%,
to $15.3 million in fiscal 1999 from $15.8 million in fiscal 1998. The Company's
operating ratio, which expresses operating expenses as a percentage of operating
revenue, increased from 93.1% in fiscal 1998 to 94.6% in fiscal 1999.

The decrease in operating income and the increased operating ratio were
attributable to a charge of approximately $1.2 million, or $0.10 per diluted
common share, of transaction costs incurred by the Company related to the
expiration of its previously announced merger agreement with Odyssey Investment
Partners. These charges were offset by the Gerth acquisition, volume growth and
rate per mile increases. Rent and purchased transportation expense increased as
a result of growth in owner-operator capacity and an increased use of
independent Mexican carriers. This increase was partially offset by a decrease
in salaries, wages, fuel and depreciation expense as a percentage of revenue.

NET INTEREST EXPENSE. Net interest expense increased by $1.5 million,
or 25.4%, to $7.4 million in fiscal 1999 from $5.9 million in fiscal 1998. The
increase was the result of higher borrowings under the Company's existing credit
facility partially offset by reduced borrowings under capital leases.

INCOME TAXES. Income taxes decreased by $0.9 million, or 23.1%, to $3.0
million in fiscal 1999 from $3.9 million in fiscal 1998. The decrease in income
tax expense is reflective of the Company's lower pre-tax income.

<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

The Company generated cash flow of $10.3 million, $12.3 million and
$18.5 million from operating activities in fiscal 2000, 1999 and 1998,
respectively. In fiscal 2000, the decrease in cash flow relative to fiscal year
1999 was due to reduced profitability, the increase in fuel expense and an
increase in trade receivables. These items were partially offset by non-cash
expenses for the loss on disposition of equipment and TruckersB2B non-cash
member and vendor development costs. The Company's primary capital requirements
over the last three years have been funding the acquisition of equipment, the
start-up of TruckersB2B, and the GETS, Gerth and Zipp acquisitions. Capital
expenditures (including the value of equipment procured under capital leases)
totaled $24.5 million, $15.8 million and $41.5 million in fiscal 2000, 1999 and
1998, respectively. The Company purchased $13.2 million, $8.1 million and $37.5
million of revenue equipment under capitalized leases and debt financing in
fiscal 2000, 1999 and 1998, respectively. The Company has historically met its
capital investment requirements with a combination of internally generated
funds, bank financing, equipment lease financing (both capitalized and
operating) and the issuance of common stock.

In August 1999, the Company completed a $60 million banking facility
("credit agreement") with ING (U.S.) Capital, LLC ("ING"). The arrangement
includes a $30 million revolving loan and a $30 million term loan. In November
1999, the Company's credit agreement with ING was increased by $5 million to $65
million. In May 2000, the Company's credit agreement with ING was amended to
reflect modifications to the Company's covenants. The modifications allowed the
Company to remain in compliance with the terms and conditions of the credit
agreement. In September 2000, the Company's credit agreement with ING was
increased by $2 million to $67 million to finance the start-up of TruckersB2B.
The ING credit agreement was obtained primarily to finance the $26 million asset
purchase of Zipp.

At June 30, 2000, $47.7 million of the Company's credit facility was
utilized as outstanding borrowings and $1.8 million was utilized for standby
letters of credit. The average balance outstanding during fiscal 2000 was $48.5
million and the highest balance outstanding was $59.7 million. The Company also
has financed its capital requirements by obtaining lease financing on revenue
equipment. At June 30, 2000, the Company had an aggregate of $58.6 million in
capital lease financing at interest rates ranging from 5.3 % to 8.0%, maturing
at various dates through 2005. Of this amount, $15.7 million is due prior to
June 30, 2001.

As of June 30, 2000, the Company had 159 tractors on order for delivery
in fiscal 2001. A commitment for lease financing on these units has been
obtained. 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. Additional growth in the tractor and
trailer fleet beyond the Company's existing orders will require additional
sources of financing.

<PAGE>

SEASONALITY

To date, the Company's revenues have not shown any significant seasonal
pattern. However, because the Company'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, many manufacturers close
or curtail their operations during holiday periods, and observe vacation
shutdowns, which may impact the Company's operations in any particular period.

INFLATION

Many of the Company's operating expenses, including fuel costs and
related fuel taxes, are sensitive to the effects of inflation, which result in
higher operating costs. The effects of inflation on the Company's business
during the past three years were most significant in fuel. The Company has
limited the effects of inflation through increases in freight rates and fuel
surcharges.

RECENT ACCOUNTING PRONOUNCEMENTS

In June 1998, the Financial Accounting Standards Board issued Statement
No. 133, Accounting for Derivative Instruments and Hedging Activities. Two
amendments to this statement have extended the required implementation date to
fiscal years beginning after June 15, 2000 and addressed a limited number of
implementation issues. Because of the Company's minimal use of derivatives,
management does not anticipate that the adoption of the new Statement will have
a significant effect on earnings or the financial position of the Company.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company is exposed to various market risks, including changes in
foreign currency exchange rates, interest rates, and fuel prices. The Company
does not enter into derivatives or other financial instruments for trading or
speculative purposes.

The Company is exposed to interest rate risk primarily from its Credit
Agreement ("Credit Agreement") in which floating rates are based, at the
Company's option, upon either the bank's base rate plus a margin ranging from
.5% to 1.5% or the London Interbank Offered Rate plus a margin ranging from 1.5%
to 2.5%, depending upon performance by the Company. A hypothetical 10% movement
in interest rates would have an impact on net income of approximately $300,000.
In the event of a change of such magnitude, management would likely
consider actions to further mitigate its exposure to the change.

<PAGE>

Jaguar's revenues and expenses are generally recorded in Mexican pesos
and Gerth's revenues and expenses are recorded in United States and Canadian
dollars. The Company's foreign currency revenues are generally proportionate to
its foreign currency expenses and the Company does not generally engage in
currency hedging transactions. For purposes of consolidation, however, the
operating results earned by the Company's subsidiaries in foreign currencies is
converted into United States dollars. As a result, a decrease in the value of
the Mexican peso or Canadian dollar could adversely affect the Company's
consolidated results of operations and equity.

See "Fuel" section on page 8 of this Form 10-K for further discussion
regarding market risks associated with changes in fuel prices.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

See "Index to Consolidated Financial Statements," which is Item 14(a),
and the consolidated financial statements and schedules included as a part of
this Annual Report.

<PAGE>

CELADON GROUP, INC.

CONSOLIDATED FINANCIAL STATEMENTS

Three years ended June 30, 2000 with
Report of Independent Auditors

Contents

<TABLE>
<S> <C>
Report of Independent Auditors..........................................................21

Audited Consolidated Financial Statements:

Consolidated Balance Sheets..........................................................22
Consolidated Statements of Operations................................................23
Consolidated Statements of Cash Flows................................................24
Consolidated Statements of Stockholders' Equity......................................25
Notes to Consolidated Financial Statements...........................................26
</TABLE>

<PAGE>

REPORT OF INDEPENDENT AUDITORS

The Board of Directors and Stockholders of Celadon Group, Inc.

We have audited the accompanying consolidated balance sheets of Celadon
Group, Inc. and subsidiaries as of June 30, 2000 and 1999, and the related
consolidated statements of operations, stockholders' equity and cash flows for
each of the three years in the period ended June 30, 2000. Our audits also
included the financial statement schedule listed in the Index at Item 14(a).
These financial statements and schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and schedule based on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Celadon Group, Inc. and subsidiaries at June 30, 2000 and 1999, and the
consolidated results of its operations and its cash flows for each of the three
years in the period ended June 30, 2000, in conformity with accounting
principles generally accepted in the United States. Also, in our opinion, the
related financial statement schedule, when considered in relation to the basic
financial statements taken as a whole, presents fairly in all material respects
the information set forth therein.

/s/ ERNST & YOUNG LLP

Indianapolis, Indiana
August 24, 2000

<PAGE>

CELADON GROUP, INC.
CONSOLIDATED BALANCE SHEETS
JUNE 30, 2000 AND 1999
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
A S S E T S
Current assets:
Cash and cash equivalents.............................................................. $360 $695
Trade receivables, net of allowance for doubtful accounts of $786
and $788 in 2000 and 1999, respectively ............................................ 53,521 43,884
Accounts receivable -- other........................................................... 8,013 5,336
Prepaid expenses and other current assets ............................................. 8,280 6,941
Tires in service ...................................................................... 4,747 4,179
Income tax recoverable ................................................................ 1,639 29
Deferred income taxes.................................................................. 802 4,847
-------- --------
Total current assets ............................................................. 77,362 65,911
Property and equipment...... ................................................................ 150,119 141,213
Less accumulated depreciation and amortization......................................... 37,477 33,629
-------- --------
Net property and equipment........................................................ 112,642 107,584
Tires in service ........................................................................... 2,569 2,331
Goodwill, net of accumulated amortization ................................................. 20,435 10,967
Other assets................................................................................ 2,314 1,966
-------- --------
Total assets...................................................................... $215,322 $188,759
======== ========

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....................................................................... $5,669 $5,505
Accrued expenses ...................................................................... 26,819 17,953
Bank borrowings and current maturities of long-term debt............................... 7,055 7,239
Current maturities of capital lease obligations........................................ 15,732 15,099
-------- --------
Total current liabilities......................................................... 55,275 45,796
Long-term debt, net of current maturities................................................... 49,751 18,613
Capital lease obligations, net of current maturities........................................ 42,908 52,967
Deferred income taxes....................................................................... 8,862 14,065
Minority interest .......................................................................... 119 12
Stockholders' equity :
Preferred stock, $1.00 par value, authorized 179,985 shares; issued and outstanding
zero shares............................................................................ --- ---
Common stock, $0.033 par value, authorized 12,000,000 shares; issued 7,786,430 shares
in 2000 and 1999....................................................................... 257 257
Additional paid-in capital............................................................... 60,113 56,679
Retained earnings (deficit) ............................................................. (722) 1,319
Accumulated other comprehensive income................................................... (1,206) (605)
Treasury stock, at cost, 3,523 shares and 34,773 shares at June 30, 2000, and 1999,
respectively........................................................................... (35) (344)
-------- --------

Total stockholders' equity........................................................ 58,407 57,306
-------- --------
Total liabilities and stockholders' equity........................................ $215,322 $188,759
======== ========
</TABLE>

See accompanying notes to consolidated financial statements.

<PAGE>

CELADON GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED JUNE 30, 2000, 1999 AND 1998
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
2000 1999 1998
---- ---- ----
<S> <C> <C> <C>
Operating revenue............................................. $351,569 $281,829 $229,928

Operating expenses:
Salaries, wages and employee benefits.................... 96,775 76,183 69,938
Fuel..................................................... 36,934 26,738 29,404
Operating costs and supplies............................. 26,930 26,266 18,952
Insurance and claims..................................... 9,588 7,166 6,488
Depreciation and amortization............................ 14,521 13,161 12,889
Rent and purchased transportation........................ 132,751 97,366 61,466
Professional and consulting fees......................... 1,807 2,174 1,503
Communications and utilities............................. 4,278 3,786 3,285
Permits, licenses and taxes ............................ 6,198 5,100 3,901
General, administrative, and selling..................... 10,176 8,598 6,298
Non-cash member and vendor development costs............. 2,767 --- ---
-------- -------- --------
Total operating expenses.............................. 342,725 266,538 214,124
-------- -------- --------

Operating income ............................................. 8,844 15,291 15,804

Other (income) expense:
Interest income.......................................... (86) (185) (493)
Interest expense......................................... 9,324 7,570 6,398
Other (income) expense, net ............................. 256 85 (12)
Minority interest in subsidiary loss..................... (547) --- ---
Loss on disposition of equipment......................... 3,266 --- ---
-------- -------- --------
Income (loss) before income taxes............................. (3,369) 7,821 9,911
Provision (benefit) for income taxes.......................... (1,328) 2,980 3,902
-------- -------- --------
Net income (loss)..................................... $ (2,041) $ 4,841 $ 6,009
======== ======== ========

Earnings (loss) per Common Shares:
Diluted earnings (loss) per share..................... $(0.26) $0.62 $0.78
Basic earnings (loss) per share....................... $(0.26) $0.63 $0.78
Average shares outstanding:
Diluted .............................................. 7,777 7,784 7,752
Basic ................................................ 7,777 7,739 7,664
</TABLE>

See accompanying notes to consolidated financial statements.

<PAGE>

CELADON GROUP, INC
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED JUNE 30, 2000 AND 1999
(DOLLARS IN THOUSANDS)

2000 1999 1998
---- ---- ----

Cash flows from operating activities:
Net income (loss) ..................................................... $ (2,041) $ 4,841 $ 6,009
Adjustments to reconcile net income (loss) to net cash provided
by operating activities:
Depreciation and amortization ...................................... 14,521 13,654 14,154
Loss on disposition of equipment ................................... 3,266 --- ---
Non-cash member and vendor development costs ....................... 2,767 --- ---
Provision (benefit) for deferred income taxes ...................... (2,273) 1,332 2,884
Provision for doubtful accounts .................................... 494 716 250
Changes in assets and liabilities:
Trade receivables .............................................. (5,541) (5,537) (245)
Accounts receivable -- other ................................... (2,581) (954) (2,545)
Income tax recoverable ......................................... (1,572) 3,140 1,407
Tires in service ............................................... (934) (955) (738)
Prepaid expenses and other current assets ...................... (52) (1,348) (502)
Other assets ................................................... (927) 355 446
Accounts payable and accrued expenses .......................... 5,189 (2,951) (2,638)
Income taxes payable ........................................... --- (43) ---
-------- -------- --------
Net cash provided by operating activities ...................... 10,316 12,250 18,482
Cash flows from investing activities:
Purchase of property and equipment ................................. (11,971) (7,643) (3,623)
Proceeds from sale of property and equipment ....................... 14,405 10,772 4,689
Purchase of business, net of cash acquired ......................... (24,921) --- (3,670)
-------- -------- --------
Net cash provided by (used for) investing activities ........... (22,487) 3,129 (2,604)
Cash flows from financing activities:
Purchase of common stock held in treasury .......................... --- (103) (586)
Proceeds from issuance of common stock ............................. 280 419 1,328
Proceeds from issuances of common stock in subsidiary .............. 803 --- ---
Proceeds from bank borrowings and debt ............................. 38,614 5,937 1,506
Payments on bank borrowings and debt ............................... (14,691) (6,513) (2,397)
Principal payments on capital lease obligations .................... (13,170) (16,961) (15,037)
-------- -------- --------
Net cash provided by (used for) financing activities ........... 11,836 (17,221) (15,186)
-------- -------- --------
(Decrease) increase in cash and cash equivalents .......................... (335) (1,842) 692
Cash and cash equivalents at beginning of year ............................ 695 2,537 1,845
-------- -------- --------
Cash and cash equivalents at end of year .................................. $ 360 $ 695 $ 2,537
======== ======== ========

</TABLE>

See accompanying notes to consolidated financial statements.

<PAGE>

CELADON GROUP, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED JUNE 30, 2000, 1999 AND 1998
(Dollars in thousands, except share amounts)

ACCUMULATED TOTAL
COMMON STOCK ADDITIONAL RETAINED OTHER TREASURY STOCK-
NO. OF SHARES PAID-IN EARNINGS COMPREHENSIVE STOCK- HOLDERS'
OUTSTANDING AMOUNT CAPITAL (DEFICIT) INCOME/(LOSS) COMMON EQUITY
----------- ------ ------- -------- ------------- ------ ------

<S> <C> <C> <C> <C> <C> <C> <C>
Balance at June 30, 1997 .......... 7,622,580 $256 $56,281 $(9,531) $ (252) $(960) $45,794

Net income ........................ -- -- -- 6,009 -- -- 6,009
Equity adjustments for foreign
currency translation ............ -- -- -- -- (223) -- (223)
---------- ---- ------- ------- ------- ----- -------
Comprehensive income (loss) ....... -- -- -- 6,009 (223) -- 5,786
Exercise of warrant ............... 35,850 1 245 -- -- -- 246
Treasury stock purchases .......... (43,000) -- -- -- -- (586) (586)
Exercise of incentive stock options 106,559 -- 138 -- -- 944 1,082
---------- ---- ------- ------- ------- ----- -------
Balance at June 30, 1998 .......... 7,721,989 257 56,664 (3,522) (475) (602) 52,322

Net income ........................ -- -- -- 4,841 -- -- 4,841
Equity adjustments for foreign
currency translation ............ -- -- -- -- (130) -- (130)
---------- ---- ------- ------- ------- ----- -------
Comprehensive income (loss) ....... -- -- -- 4,841 (130) -- 4,711
Tax benefits from stock options ... -- -- 43 -- -- -- 43
Treasury stock purchases .......... (8,000) -- -- -- -- (103) (103)
Exercise of incentive stock options 37,668 -- (28) -- -- 361 333
---------- ---- ------- ------- ------- ----- -------
Balance at June 30, 1999 .......... 7,751,657 257 56,679 1,319 (605) (344) 57,306

Net loss .......................... -- -- -- (2,041) -- -- (2,041)
Equity adjustments for foreign
currency translation ............ -- -- -- -- (601) -- (601)
---------- ---- ------- ------- ------- ----- -------
Comprehensive (loss) .............. -- -- -- (2,041) (601) -- (2,642)
Additional paid-in capital arising
from subsidiary capital
transaction ................... -- -- 3,428 -- -- -- 3,428
Tax benefits from stock options ... -- -- 35 -- -- -- 35
Exercise of incentive stock options 31,250 -- (29) -- -- 309 280
---------- ---- ------- ------- ------- ----- -------
Balance at June 30, 2000 .......... 7,782,907 $257 $60,113 $ (722) $(1,206) $ (35) $58,407
========== ==== ======= ======= ======= ===== =======

</TABLE>

See accompanying notes to financial statements.

<PAGE>

CELADON GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2000

(1) ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION

Celadon Group, Inc. (the "Company") through its operating subsidiaries,
provides long-haul, full truckload services between the United States, Canada
and Mexico. The Company's primary trucking subsidiaries are: Celadon Trucking
Services, Inc. ("CTSI"), a U.S. based Company; Servicio de Transportation
Jaguar, S.A. de C.V. ("Jaguar"), a Mexican based company; Gerth Transport
("Gerth"), a Canadian based company; Zipp Express, Inc. ("Zipp"), a U.S. based
Company; and Cheetah Transportation Company ("Cheetah"), a U.S. based company.

TruckersB2B, Inc. ("TruckersB2B") is an internet based
"business-to-business" membership program, majority owned by Celadon E-Commerce,
Inc., a wholly owned subsidiary of Celadon Group, Inc.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation and Presentation

The consolidated financial statements include the accounts of Celadon
Group, Inc. and its wholly and majority owned subsidiaries, all of which are
wholly owned except for Jaguar and TruckersB2B in which the Company has a 75%
and 84% interest, respectively. All significant intercompany accounts and
transactions have been eliminated in consolidation. Unless otherwise noted, all
references to annual periods refer to the respective fiscal years ended June 30.

Use of Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets, liabilities, revenues,
expenses and related disclosures at the date of the financial statements and
during the reporting period. Such estimates include provisions for damage and
liability claims and uncollectible accounts receivable. Actual results could
differ from those estimates.

Cash and Cash Equivalents

The Company considers all highly liquid instruments purchased with a
maturity of three months or less when purchased to be cash equivalents.

<PAGE>

CELADON GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
JUNE 30, 2000

Revenue Recognition

Trucking revenue is recognized as of the date the freight is delivered
by the Company.

TruckersB2B revenue is recognized at different times depending on the
product or service purchased by the TruckersB2B member ("member"). Revenue for
fuel rebates is recognized in the month the fuel was purchased by a member. The
tire rebate revenue is recognized when proof-of-purchase documents are received
from members. In most other programs, TruckersB2B receives commissions,
royalties or transaction fees based upon percentages of member purchases.
TruckersB2B records revenue under these programs when earned and it receives the
necessary information to calculate the revenue.

Tires in Service

Original and replacement tires on tractors and trailers are included in
tires in service and are amortized over 12 to 36 months.

Fuel

Fuel is generally expensed when purchased, except for the fuel supplies
at terminals, which are classified as prepaid expenses.

Property and Equipment

Property and equipment are stated at cost. Property and equipment under
capital leases are stated at fair value at the inception of the lease.

Depreciation of property and equipment and amortization of assets under
capital leases is generally computed using the straight-line method and is based
on the estimated useful lives (net of salvage value) of the related assets as
follows:

<TABLE>
<S> <C>
Revenue and service equipment.......................... 4 -12 years
Furniture and office equipment......................... 5 - 7 years
Buildings.............................................. 20 years
Leasehold improvements................................. Lesser of life of lease or useful
life of improvement
</TABLE>

Initial delivery costs relating to placing tractors and trailers in
service, which are included in revenue and service equipment, are being
amortized on a straight-line basis over the lives of the assets or in the case
of leased equipment, over the respective lease term. The cost of maintenance and
repairs, including tractor overhauls, is charged to expense as incurred.

<PAGE>

CELADON GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
JUNE 30, 2000

Goodwill

Goodwill reflects the excess of cost over net assets of businesses
acquired and is being amortized by the straight-line method over 15-40 years.
The carrying value of the goodwill is reviewed if the facts and circumstances
suggest that it may be permanently impaired. Such review is based upon the
undiscounted expected future operating profit derived from such businesses and,
in the event such result is less than the carrying value of the goodwill, the
carrying value of the goodwill is reduced to an amount that reflects the
expected future benefit.

Insurance Reserves

Reserves for known claims and incurred but not reported claims up to
specific policy limits are accrued based upon information provided by insurance
adjusters. Such amounts are included in accrued expenses.

Advertising

Advertising costs are expensed as incurred by the Company. Advertising
expenses for fiscal 2000, 1999, and 1998 were approximately $3.5 million, $1.3
million, and $0.9 million, respectively, and are included in salaries, wages
and employee benefits and general, administrative, and selling expenses in the
statement of operations.

Income Taxes

Deferred taxes are recognized for the future tax effects of temporary
differences between the carrying amounts of assets and liabilities for financial
and income tax reporting, based on enacted tax laws and rates. Federal income
taxes are provided on the portion of the income of foreign subsidiaries that is
expected to be remitted to the United States.

Credit Risk

Financial instruments which potentially subject the Company to
concentrations of credit risk consist primarily of trade receivables.
Concentrations of credit risk with respect to trade receivables are generally
limited due to the Company's large number of customers and the diverse range of
industries, which they represent. Accounts receivable balances due from
DaimlerChrysler totaled $6.3 million or 12% of the gross trade receivables at
June 30, 2000. The Company had no other significant concentrations of credit
risk.

<PAGE>

CELADON GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
JUNE 30, 2000

Foreign Currency Translation

Foreign financial statements are translated into U.S. dollars in
accordance with Statement of Financial Accounting Standards No. 52, "Foreign
Currency Translation." Assets and liabilities of the Company's foreign
operations are translated into U.S. dollars at year-end exchange rates. Income
statement accounts are translated at the average exchange rate prevailing during
the year. Resulting translation adjustments are included in other comprehensive
income.

Reclassifications

Certain reclassifications have been made to the 1999 and 1998 financial
statements in order to conform to the 2000 presentation.

Recent Accounting Pronouncements

(2) ACQUISITIONS

Effective July 1, 1999, the Company acquired the assets and assumed
certain liabilities of Zipp for approximately $26 million. Zipp is a major
carrier to and from Mexico and also maintains a strong base of business in the
Midwest. At the acquisition date, Zipp operated a relatively new fleet of about
270 tractors and 800 trailers. The Company accounted for the transaction as a
purchase and funded the acquisition using its line of credit. The allocation of
the Zipp purchase price resulted in $10.1 million of goodwill to be amortized
over a period of 15 years. The results of operations are included in
consolidated results of operations beginning July 1, 1999.

<PAGE>

CELADON GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
JUNE 30, 2000

Assuming the transaction described above was consummated as of the
beginning of the fiscal year ended June 30, 1999, and after giving effect to
certain pro forma adjustments, the pro forma consolidated results of operations
for the fiscal year ended June 30, 1999 would be as follows:

<TABLE>
<CAPTION>
For the fiscal
year ended
June 30, 1999
-------------
(Dollar amounts in thousands expect per share data)
<S> <C>
Operating revenue........................... $321,524
Operating income............................ 19,733
Net income.................................. 6,258
Net income per common share................. 0.80
</TABLE>

In addition, as a result of this acquisition, the Company disposed of a
group of its own older equipment and related items that will no longer be
required due to the acquired fleet having newer more fuel efficient equipment.
The combined fleets resulted in operating efficiencies that allowed the Company
to dispose of this excess equipment. The effect of upgrading the company's fleet
through this disposition resulted in a non-cash charge of approximately $3.3
million in fiscal year 2000.

(3) NON-CASH MEMBER AND VENDOR DEVELOPMENT COSTS

Non-cash member and vendor development costs represents the fair value,
at measurement date, of TruckersB2B common stock issued to strategic partners in
connection with the development of its member base and product and service
offerings.

(4) PROPERTY, EQUIPMENT AND LEASES

Property, Equipment and Revenue Equipment Under Capital Leases

Property and equipment consists of the following (in thousands):

<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
Revenue equipment owned............................ $ 42,150 $ 32,190
Revenue equipment under capital leases............. 92,774 98,095
Furniture and office equipment..................... 4,806 4,841
Land and buildings................................. 8,814 5,136
Service equipment.................................. 851 489
Leasehold improvements............................. 724 462
-------- --------
$150,119 $141,213
======== ========
</TABLE>

Included in accumulated depreciation was $23.5 million and $21.9
million in 2000 and 1999, respectively, related to revenue equipment under
capital leases.

<PAGE>

CELADON GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
JUNE 30, 2000

Depreciation and amortization expense relating to property and
equipment owned and revenue equipment under capital leases was $13.0 million in
2000, $12.4 million in 1999, $12.3 million in 1998.

Lease Obligations

The Company leases certain revenue and service equipment under
long-term lease agreements, payable in monthly installments with interest at
rates ranging from 5.3% to 8.0% per annum, maturing at various dates through
2005.

The Company leases warehouse and office space under noncancellable
operating leases expiring at various dates through September 2016. Certain
leases contain renewal options.

Future minimum lease payments relating to capital leases and to
operating leases with initial or remaining terms in excess of one year are as
follows (in thousands):

<TABLE>
<CAPTION>
YEAR ENDED CAPITAL OPERATING
JUNE 30 LEASES LEASES
------- ------ ------
<S> <C> <C>
2001................................................... $19,076 $18,439
2002................................................... 16,353 13,811
2003................................................... 19,867 11,675
2004................................................... 9,037 20,728
2005................................................... 1,879 3,000
Thereafter ............................................ -- 13,455
------- -------
Total minimum lease payments.................... $66,212 $81,108
======= =======

Less amounts representing interest..................... 7,572
-------
Present value of net minimum lease payments............ 58,640
Less current maturities................................ 15,732
-------
Non-current portion............................. $42,908
=======
</TABLE>

Total rental expense for operating leases is as follows (in thousands):

<TABLE>
<CAPTION>
2000 1999 1998
---- ---- ----
<S> <C> <C> <C>
Revenue, service equipment and purchased transportation........... $130,412 $95,692 $59,775
Office facilities and terminals................................... 2,339 1,674 1,691
-------- ------- -------
$132,751 $97,366 $61,466
======== ======= =======
</TABLE>

<PAGE>

CELADON GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
JUNE 30, 2000

(5) BANK BORROWINGS AND LONG-TERM DEBT

The Company's outstanding borrowings consist of the following at
June 30:

<TABLE>
<CAPTION>
2000 1999
---- ----
(in thousands)
<S> <C> <C>
Outstanding amounts under lines of credit (collateralized
by certain trade receivables and revenue equipment)............... $47,715 $20,143
Other borrowings.................................................... 9,091 5,709
------- -------
56,806 25,852
Less current maturities............................................. 7,055 7,239
------- -------
Non-current portion............................................... $49,751 $18,613
======= =======
</TABLE>

Lines of Credit

In August 1999, the Company completed a $60 million banking facility
("credit agreement") with ING (U.S.) Capital LLC. The arrangement includes $30
million revolving loan and a $30 million term loan. In November 1999, the
Company's credit agreement was increased by $5 million to $65 million. In May
2000, the Company's credit agreement with ING was amended to reflect
modifications to the Company's covenants. The modifications allowed the Company
to remain in compliance with the terms and conditions of the credit agreement.
On September 6, 2000, the Company's credit agreement was increased by $2 million
to $67 million, primarily to finance the operations of TruckersB2B. Interest is
based, at the Company's option, upon either the bank's base rate plus a margin
ranging from .5% to 1.5% or the London Interbank Offered Rate plus a margin
ranging from 1.5% to 2.5% depending upon performance by the Company. At June 30,
2000, the interest rate charged on outstanding borrowings was 8.8%. In addition,
the Company pays a commitment fee of .5% on the unused portion of the 2000
credit agreement.

Amounts available under the credit agreement are determined based upon
the Company's borrowing base, as defined. In addition, there are certain
covenants which restrict, among other things, the payment of cash dividends, and
require the Company to maintain certain financial ratios and certain other
financial conditions. Such borrowings are secured by a significant portion of
the Company's assets.

<PAGE>

CELADON GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
JUNE 30, 2000

Maturities of long-term debt, assuming the Company exercises the
conversion feature within its credit agreement entered into in August 1999, for
the years ending June 30 are as follows (in thousands):

Other debt borrowings consist primarily of mortgage debt financing for
equipment purchases.

(6) EMPLOYEE BENEFIT PLANS

401(k) Profit Sharing Plan

The Company has a 401(k) profit sharing plan which permits U.S.
employees of the Company to contribute up to 15% of their annual compensation,
up to certain Internal Revenue Service limits. The contributions made by each
employee are fully vested at all times and are not subject to forfeiture. The
Company makes a matching contribution of 25% of the employee's contribution up
to 5% of their annual compensation and may make additional discretionary
contributions. The aggregate Company contribution may not exceed 5% of the
employee's compensation. Employees vest in the Company's contribution to the
plan at the rate of 20% per year from the date of contribution. Contributions
made by the Company during 2000, 1999 and 1998 amounted to $173,000, $117,000
and $112,000, respectively. No discretionary contributions were made during
2000, 1999 or 1998.

Employee Stock Purchase Plan

The Company's Board of Directors authorized the sale of up to 250,000
shares of the Company's Common Stock under an employee purchase plan. The common
stock, which may be treasury shares or newly issued shares, sold at a price
equal to 85% of the fair market value of the shares as of the day of sale. There
were approximately 197 active participants in the plan as of June 30, 2000.
Participation in the plan is limited to employees who meet the eligibility
requirements set forth in the plan, and executive officers of the Company may
not participate. As of June 30, 2000, 85,619 shares had been purchased by
employees under the Plan in open market transactions for an average price of
$11.50 per share. The Company's contribution to the purchases made was $45,000
in fiscal 2000.

<PAGE>

CELADON GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
JUNE 30, 2000

(7) STOCK PLANS

Stock Options -- Celadon Group, Inc.

The Company has a Stock Option Plan ("Plan") which provides for the
granting of stock options, stock appreciation rights and restricted stock awards
to purchase not more than 800,000 shares of Common Stock, subject to adjustment
under certain circumstances, to select management and key employees of the
Company and its subsidiaries. The options have a three year vesting period.

The Company has elected to follow Accounting Principles Board Opinion
(APB) No. 25, "Accounting for Stock Issued to Employees," and related
interpretations in accounting for its stock options. Under APB No. 25, because
the exercise price of the Company's employee stock options equals the market
price of the underlying stock on the date of grant, no compensation expense is
recognized for the Celadon options.

On August 11, 1999, the Company cancelled 65,000 out-of-the-money
options and issued replacement options with an exercise price equal to the
then-current market price of $8.00 per share. The replacement options began a
three year vesting period on that date. Through June 30, 2000, the Company has
accounted for these replacement options under the provisions of the Emerging
Issues Task Force's ("EITF") consensus 87-33, Stock Compensation Issues Related
to Market Decline. As such, no compensation expense has been recognized for the
year ended June 30, 2000. However, effective July 1, 2000, the provisions of
Financial Accounting Standards Board ("FASB") Interpretation No. 44, Accounting
for Certain Transactions Involving Stock Compensation - An Interpretation of APB
Opinion No. 25, supersede those of EITF consensus 87-33 with regards to these
options. Under FASB Interpretation No. 44, since the replacement options were
not vested at July 1, 2000, the portion of the options' intrinsic value measured
at that time that is attributable to the remaining vesting period will be
recognized over the future remaining vesting period. On July 1, 2000, the
intrinsic value of the options was $211,000 and will be amortized the remaining
vesting period of the options.

<PAGE>

CELADON GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
JUNE 30, 2000

Statement of Financial Accounting Standards ("SFAS") No. 123,
"Accounting for Stock-Based Compensation," requires presentation of pro forma
net income and earnings per share as if the Company had accounted for its
employee stock options granted subsequent to June 30, 1995 under the fair value
method of that statement. Under SFAS No. 123, total compensation expense for
stock-based awards of $796,000 and $378,000 in 2000 and 1999, respectively, on a
pro forma basis, would have been reflected in income on a pretax basis. For
purposes of pro forma disclosure, the estimated fair value of the options is
amortized to expense over the vesting period. Under the fair value method, the
Company's net income (in thousands) and earnings per share would have been
reduced as follows:

<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
Net Income.............................. $480 $227
Earnings per share...................... .06 .03
</TABLE>

The weighted-average per share fair value of the individual options
granted during fiscal year 2000 and 1999 for Celadon is estimated as $8.28 and
$6.22, respectively, on the date of grant.

The fair values of Celadon option grants for both years were determined
using a Black-Scholes option-pricing model with the following weighted average
assumptions:

<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
Dividend yield.......................... 0 0
Volatility.............................. 112.0% 61.0%
Risk-free interest rate................. 6.1% 4.9%
Forfeiture rate......................... 5.3% 16.2%
Expected life........................... 7 years 7 years
</TABLE>

<PAGE>

CELADON GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
JUNE 30, 2000

Stock option activity for Celadon is summarized below:

SHARES OF WEIGHTED
COMMON STOCK AVERAGE
ATTRIBUTABLE EXERCISE
TO OPTIONS PRICE OF OPTIONS
------------ ----------------
<S> <C> <C>
Unexercised at June 30, 1997 429,800 $11.99
Granted 124,000 13.84
Exercised (106,001) 10.17
Forfeited (44,399) 16.97
-------- ------

Unexercised at July 1, 1998 403,400 12.48
Granted 94,000 10.26
Exercised (37,668) 8.83
Forfeited (54,516) 13.21
-------- ------

Unexercised at June 30, 1999 405,216 12.21
Granted 333,500 10.47
Exercised (6,350) 12.67
Forfeited (110,466) 13.31
-------- ------

Unexercised at June 30, 2000 621,900 11.08
======== ======
</TABLE>

<PAGE>

CELADON GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
JUNE 30, 2000

The following table summarizes information concerning outstanding and
exercisable Celadon options at June 30, 2000:

<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
------------------- -------------------
Weighted-
Average Weighted Weighted
Range of Remaining Average Average
Exercise Number Contractual Exercise Number Exercise
Prices Outstanding Life Price Exercisable Price
------ ----------- ----------- -------- ----------- -----
<S> <C> <C> <C> <C> <C>
$ 5 - $10 302,000 8.41 $ 7.68 76,335 $ 9.55
$10 - $15 194,900 8.40 12.09 136,079 12.68
$15 - $20 106,000 9.39 16.89 15,000 20.00
$20 - $25 14,000 9.70 21.01 0 0
$25 - $30 5,000 9.75 26.00 0 0
</TABLE>

Celadon shares exercisable at June 30, 2000 and 1999 were 227,414 and
240,726, respectively.

Stock Options - TruckersB2B, Inc.

On March 15, 2000, TruckersB2B, Celadon E-Commerce's majority owned
subsidiary, adopted the 2000 Stock Option Plan ("2000 Plan"). Under the 2000
Plan, TruckersB2B is authorized to grant options for up to 1,000,000 shares of
common stock to employees of TruckersB2B, Celadon, directors of TruckersB2B, and
vendors. Options granted under the 2000 Plan are for periods not to exceed ten
years and must be issued at prices not less than 100% of the fair market value
of the stock on the date of grant as determined by the Board of Directors.
Incentive stock options granted to stockholders with greater than 10% ownership
of the outstanding stock are for periods not to exceed five years. Options
generally vest at a rate of 5% per month, with a total of 50% vesting at the
date of TruckersB2B's pending initial public offering and the other 50% vesting
one year after the effective date of the pending initial public offering. In
certain cases, a portion of the options vests immediately on the date of grant.

TruckersB2B has elected to follow Accounting Principles Board Opinion
(APB) No. 25, "Accounting for Stock Issued to Employees," and related
interpretations in accounting for its stock options. Under APB No. 25, because
the exercise price of TruckersB2B employee stock options equals the market price
of the underlying stock on the date of grant, no compensation expense is
recognized for the options. Options granted to employees from February 9, 2000
to June 30, 2000 under the 2000 Plan resulted in the recognition of
approximately $459,500 in deferred stock compensation expense. TruckersB2B also
entered into a tire rebate agreement with Michelin North America, Inc.
(Michelin), whereby TruckersB2B issued an option to Michelin to purchase
TruckersB2B stock as consideration for entering into the agreement. Because
Michelin has no contractual commitment to provide products and services over the
term of the agreement, TruckersB2B has recognized an additional $266,750 of
expense related to this transaction.

<PAGE>

CELADON GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
JUNE 30, 2000

The weighted-average per share fair value of the individual options
granted during fiscal year 2000 for TruckersB2B is estimated as $.67 on the date
of the grant.

The fair value of TruckersB2B option grants for 2000 was determined
using a Black-Scholes option-pricing model with the following weighted average
assumptions:

<TABLE>
<CAPTION>
2000
----
<S> <C>
Dividend yield.......................... 0
Volatility.............................. .1%
Risk-free interest rate................. 6.5%
Forfeiture rate......................... 0%
Expected life........................... 3 years
</TABLE>

For the period from February 9, 2000 (TruckersB2B's inception date) to
June 30, 2000, 693,250 TruckersB2B options were granted at a weighted average
exercise price of $1.00. All of these options were outstanding as of June 30,
2000.

The following table summarizes information concerning outstanding and
exercisable TruckersB2B options at June 30, 2000:

<S> <C> <C> <C> <C> <C>
$1 - $1.25 692,500 9.7 $ 1.00 263,995 $ 0.94
$1.26 - $3.09 750 9.8 2.26 108 2.24

</TABLE>

<PAGE>

CELADON GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
JUNE 30, 2000

Stockholder Rights Plan

On June 28, 2000, the Company's Board of Directors approved a
Stockholder Rights Plan whereby, on July 31, 2000, common stock purchase rights
("Rights") were distributed as a dividend at the rate of one Right for each
share of the Company's common stock held as of the close of business on July 20,
2000. The Rights will expire on July 18, 2010. Under the plan, the Rights will
be exercisable only if triggered by a person or group's acquisition of 15% or
more of the Company's common stock. Each Right, other than Rights held by the
acquiring person or group, would entitle its holder to purchase a specified
number of the Company's common shares for 50% of their market value at the time.

Following the acquisition of 15% or more of the Company's common stock
by a person or group, the Board of Directors may authorize the exchange of the
Rights, in whole or in part, for shares of the Company's common stock at an
exchange ratio of one share for each Right, provided that at the time of such
proposed exchange no person or group is then the beneficial owner of 50% or more
of the Company's common stock.

Unless a 15% acquisition has occurred, the Rights may be redeemed by
the Company at any time prior to the termination date of the plan.

<PAGE>

CELADON GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
JUNE 30, 2000

(8) EARNINGS PER SHARE

The following is a reconciliation of the numerators and demoninators
used in computing earnings per share (in thousands):

<TABLE>
<CAPTION>
2000 1999 1998
---- ---- ----
<S>
<C> <C> <C>
Income (loss) available to common shareholders................ $(2,041) $4,841 $6,009
======== ====== ======

Basic earnings (loss) per share:
Weighted - average number of common
shares outstanding ................................... 7,777 7,739 7,664

Basic earnings (loss) per share.......................... $(0.26) $0.63 $0.78
======== ====== ======

Diluted earnings (loss) per share:
Weighted-average number of common
shares outstanding ................................... 7,777 7,739 7,664
Effect of stock options and other incremental shares..... --- 45 88
-------- ------ -------

Weighted-average number of common shares
outstanding-diluted ................................... 7,777 7,784 7,752
======== ====== ======

Diluted earnings (loss) per share............................ $(0.26) $0.62 $0.78
======== ====== ======
</TABLE>

Diluted loss per share for fiscal year 2000 does not include the
anti-dilutive effect of 113 thousand stock options and other incremental shares.

(9) RELATED PARTY TRANSACTIONS

The Company, the Company's Chief Executive Officer (the "Company
Executive"), and Hanseatic, a significant shareholder, are parties to a
stockholders agreement. This agreement provides that, as long as Hanseatic or
the Company Executive each beneficially own at least five percent of the
outstanding shares of Common Stock, the Company shall use its best efforts to
ensure that one member of the Company's board of directors is a designee of
Hanseatic and that another member of the Company's board of directors is a
designee of the Company Executive. In addition, the Company Executive and
Hanseatic have agreed to vote all shares of Common Stock owned by them in favor
of the election of such nominees or, upon the death of the Company Executive,
for the designee of the holder of a majority of the Company Executive's shares
of Common Stock on the date of death.

<PAGE>

CELADON GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
JUNE 30, 2000

On March 10, 2000, TruckersB2B sold 787,500 shares of its Class A
common stock for $1 per share. Hanseatic purchased 350,000 shares, CG Asian -
American Fund, L.P. ("CG Asian") purchased 350,000 shares, and Michael Miller, a
Company board member, purchased 87,500 shares. CG Asian is an investment fund
advised by Sycamore Management Corporation, whose President is Kilin To. Kilin
To is a member of the Company's board of directors and a member of the
TruckersB2B board of directors.

(10) HEDGING ACTIVITIES, COMMITMENTS AND CONTINGENCIES

The Company has outstanding commitments to purchase approximately $14.0
million of revenue equipment at June 30, 2000, which will be financed utilizing
long-term lease agreements.

Standby letters of credit, not reflected in the accompanying
consolidated financial statements, aggregated approximately $1.8 million at June
30, 2000.

The Company has employment and consulting agreements with various key
employees providing for minimum combined annual compensation over the next two
years ranging from $1.6 million in 2001 to $0.3 million in 2002.

There are various claims, lawsuits and pending actions against the
Company and its subsidiaries in the normal course of the operations of its
businesses. 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 consolidated financial position.

The Company had a lawsuit by the State of Texas for Interstate Motor
Carrier Sales and Use Tax for the period from April 1988 through June 1992.
Subsequent to June 30, 2000, this lawsuit was settled. The result of this
settlement was reflected in the June 30, 2000 financial statements and did not
have a material impact on the Company's financial condition or results of
operations.

The Company has a lawsuit filed by Reliance National Indemnity Company
("Reliance") relating to two truckers liability insurance policies. The Company
disagrees with Reliance and intends to vigorously defend this lawsuit. This case
is in the very early stages, and to date, no formal discovery has been
completed. 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.

<PAGE>

CELADON GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
JUNE 30, 2000

Shortages of fuel, increases in fuel prices or rationing of petroleum
products can have a materially adverse effect on the operations and
profitability of the Company. The Company cannot predict whether high fuel price
levels will continue in the future or the extent to which fuel surcharges will
be collected to offset such increases. During the years ended June 30, 1999 and
1998, a loss of $996,000 and $997,000, respectively, on futures contracts and
commodity collar transactions were included in fuel expense. At June 30, 2000,
the Company had no derivative financial instruments to reduce its exposure to
fuel price fluctuations.

The Company is a party to routine litigation incidentals to its
business, primarily involving claims for bodily injury or property damage
incurred in the transportation of freight. The Company is responsible for the
safe delivery of cargo. Since April 2000, the Company is responsible for
liability claims up to $1 million, plus administrative expenses, for each
occurrence involving personal injury or property damage. The Company is self
insuring its physical damage losses and up to $150,000 for workers compensation
losses and up to $25,000 for cargo claims. The Company maintains separate
insurance in Mexico consisting of bodily injury and property damage coverage
with minimum deductibles. Management believes its uninsured exposure is
reasonable for the transportation industry. Consequently, the Company does not
believe that the litigation and claims experienced will have a material impact
on the Company's financial position or results of operations.

Between February 29, 2000 and April 11, 2000, TruckersB2B entered into
two vendor agreements to provide transaction processing services and assist in
the enrollment of members. Under the terms of these agreements, the vendors are
entitled to earn up to 1,000,000 shares of TruckersB2B's Class A common stock in
exchange for the enrollment of members in the TruckersB2B network of
participating trucking companies, as stipulated in the agreements. As of June
30, 2000, 200,000 shares pursuant to these agreements have been earned. These
transactions are valued at the fair value of the underlying shares as of the
date that the specified performance commitments have been met, and recognized as
a non-cash member and vendor development cost in the statement of operations at
that time. If these vendors do not meet the thresholds outlined in the
agreements prior to December 31, 2000, TruckersB2B's obligation to issue the
shares will expire.

<PAGE>

CELADON GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
JUNE 30, 2000

(11) INCOME TAXES

The income tax provision for operations in 2000, 1999 and 1998
consisted of the following (in thousands):

<TABLE>
<CAPTION>
2000 1999 1998
---- ----- ----
<S> <C> <C> <C>
Current:
Federal....................................... $ --- $ --- $ 229
State and local............................... 236 137 274
Foreign............................................ 709 1,511 515
------- ------- -------
$ 945 $1,648 $1,018
------- ------ -------
Deferred:
Federal....................................... (1,742) 1,209 2,533
State and local............................... (531) 123 351
------- -------- --------
(2,273) 1,332 2,884
-------- ------- -------
$(1,328) $2,980 $3,902
======== ====== ======
</TABLE>

No provision is made for U.S. federal income taxes on undistributed
earnings of foreign subsidiaries of approximately $5.2 million at June 30, 2000,
as management intends to permanently reinvest such earnings in the Company's
operations in the respective foreign countries where earned.

The Company's effective tax rate on income (loss) differs from the
statutory federal tax rate as follows:

<TABLE>
<CAPTION>
2000 1999 1998
---- ---- ----
<S> <C> <C> <C>
Statutory federal tax rate........................... 35.00% 35.00% 35.00%
State taxes, net of federal benefit.................. 5.78 2.19 4.16
Non-deductible expenses ............................. (7.77) 1.04 .77
Other, net........................................... 6.41 (.13) (.56)
------- ------ ------
Effective tax rate.......................... 39.42% 38.10% 39.37%
======= ====== ======
</TABLE>

<PAGE>

CELADON GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
JUNE 30, 2000

The tax effect of temporary differences that give rise to significant
portions of the deferred tax assets and liabilities at June 30, 2000 and 1999
consisted of the following (in thousands):

<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
Deferred tax assets:
Allowance for doubtful accounts ............................... $ 190 $ 125
Insurance reserves............................................. 907 146
Net operating loss carryforwards............................... 1,852 1,504
Alternative minimum tax credit carryforward.................... 628 628
Other.......................................................... 6 2
------ ------
Total deferred tax assets............................ $3,583 $2,405
====== ======
Deferred tax liabilities:
Property and equipment........................................ $(5,943) $(5,003)
Capital leases .............................................. (3,951) (3,642)
Deferred gain................................................. (1,086) (1,086)
Other......................................................... (663) (1,892)
--------- ---------
Total deferred tax liabilities....................... $(11,643) $(11,623)
========= =========
Net current deferred tax assets........................................ $802 $4,847
Net noncurrent deferred tax liabilities................................ (8,862) (14,065)
--------- ---------
Total net deferred tax liabilities................... $ (8,060) $ (9,218)
========= =========
</TABLE>

As of June 30, 2000, the Company had approximately $5.4 million of net
operating loss carryforwards with expiration dates through 2015.

<PAGE>

CELADON GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
JUNE 30, 2000

(12) SUPPLEMENTAL CASH FLOW INFORMATION

In 2000, 1999 and 1998, capital lease obligations and debt financing in
the amount of $13.2 million, $8.1 million and $37.5 million, respectively, were
incurred in connection with the purchase of, or option to purchase, revenue
equipment and tires in service.

For 2000, 1999 and 1998, the Company made interest payments of $9.7
million, $7.4 million and $6.3 million, respectively.

For 2000, 1999 and 1998, the Company made income tax payments of $1.7
million, $1.1 million, and $1.1 million, respectively.

(13) SEGMENT INFORMATION AND SIGNIFICANT CUSTOMERS

The Company operates in two segments, transportation and e-commerce.
The Company generates revenue, in the transportation segment, providing
truckload hauling services through its subsidiaries, CTSI, Jaguar, Gerth, Zipp
and Cheetah. The Company began providing certain services over the internet
through its e-commerce subsidiary TruckersB2B in the last half of fiscal year
2000. The e-commerce segment generates revenue by providing discounted fuel,
tires, and other products and services to small and medium-sized trucking
companies. The Company evaluates the performance of its operating segments based
on operating income (loss). As the e-commerce segment began in fiscal year 2000,
there is no reportable information for this segment for fiscal year 1999 and
1998 (all numbers in thousands).

<TABLE>
<CAPTION>
FISCAL YEAR ENDED
JUNE 30, 2000
TRANSPORTATION E-COMMERCE TOTAL
-------------- ---------- -----
<S> <C> <C> <C>
Revenue from external customers........... 351,357 212 351,569
Operating income (loss)................... 13,529 (4,685) 8,844
Interest revenue.......................... 86 --- 86
Interest expense ......................... 9,324 --- 9,324
Depreciation and amortization expense..... 14,511 10 14,521
Income tax expense (benefit).............. 2,926 (1,598) (1,328)

Significant non-cash items:
Loss on disposition of assets............. 3,266 --- 3,266
Non-cash member and vendor
development costs...................... --- 2,767 2,767

Total assets ............................ 214,318 1,004 215,322
</TABLE>

<PAGE>

CELADON GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
JUNE 30, 2000

Information as to the Company's operations by geographic area is
summarized below (in thousands):

<TABLE>
<CAPTION>
2000 1999 1998
---- ---- ----
<S> <C> <C> <C>
Operating revenue:
United States........................ $280,575 $221,937 $ 215,069
Canada............................... 54,528 49,798 5,421
Mexico............................... 16,466 10,094 9,438
-------- -------- --------
Total ........................ $351,569 $281,829 $229,928
======== ======== ========

Long lived assets:
United States........................ $96,623 $94,334 $106,254
Canada............................... 12,576 10,450 7,625
Mexico............................... 3,443 2,800 1,180
-------- -------- --------
Total ........................ $112,642 $107,584 $115,059
======== ======== ========
</TABLE>

The Company's largest customer is DaimlerChrysler, which accounted for
approximately 24%, 25%, and 37% of the Company's total revenue for fiscal 2000,
1999, and 1998, respectively. The Company transports DaimlerChrysler original
equipment automotive parts primarily between the United States and Mexico and
DaimlerChrysler after-market replacement parts and accessories within the United
States. The Company's most recent agreements with DaimlerChrysler are covered by
three agreements: (a) an agreement for international freight with the Chrysler
division which expires in December 2000, (b) a domestic agreement with the
Chrysler division which expires in October 2000, and (c) an international
contract with the Freightliner division, which expires in April 2001. The two
Chrysler division agreements accounted for approximately 22%, 22%, and 37% of
the company's total revenue for fiscal 2000, 1999, and 1998, respectively. The
Freightliner division contract accounted for approximately 2% and 3% of the
Company's total revenue for fiscal 2000 and 1999, respectively. No other
customer accounted for more than 10% of the Company's total revenue during any
of its three most recent fiscal years.

<PAGE>

CELADON GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
JUNE 30, 2000

(14) SELECTED QUARTERLY DATA (UNAUDITED)

Summarized quarterly data for fiscal 2000 and 1999 follows (in thousands except
per share amounts):

<TABLE>
<CAPTION>
FISCAL YEAR 2000
1ST QTR. 2ND QTR. 3RD QTR. 4TH QTR.
------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operating revenues.......................... $ 82,665 $86,612 $90,493 $91,799
Operating expenses.......................... 78,250 82,714 89,219 92,542
-------- ------- -------- --------
Operating income (loss)..................... 4,415 3,898 1,274 (743)
Other expense............................... 5,357 2,226 2,418 2,212
-------- ------- -------- --------
Income (loss) before taxes.................. (942) 1,672 (1,144) (2,955)
Income taxes (benefit)...................... (353) 619 (433) (1,161)
-------- ------- -------- --------
Net income (loss)........................... $ (589) $ 1,053 $ (711) $(1,794)
======== ======= ======== ========
Basic earnings per share.................... $ (0.08) $ 0.14 $ (0.09) $ (0.23)
======== ======= ======== ========
Diluted earnings per share.................. $ (0.08) $ 0.14 $ (0.09) $ (0.23)
======== ======= ======== ========
</TABLE>

<TABLE>
<CAPTION>
FISCAL YEAR 1999
1ST QTR. 2ND QTR. 3RD QTR. 4TH QTR.
------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operating revenues.......................... $72,113 $69,402 $68,535 $71,779
Operating expenses.......................... 67,750 67,265 64,428 67,143
------- ------- ------- -------
Operating income............................ 4,363 2,137 4,107 4,636
Other expense............................... 1,906 1,881 1,826 1,809
-------- ------- ------- -------
Income before taxes......................... 2,457 256 2,281 2,827
Income taxes................................ 925 98 888 1,068
-------- ------- ------- -------
Net income.................................. $ 1,532 $ 158 $ 1,393 $ 1,759
======== ======= ======= =======
Basic earnings per share.................... $ 0.20 $ 0.02 $ 0.18 $ 0.23
======== ======= ======= =======
Diluted earnings per share.................. $ 0.20 $ 0.02 $ 0.18 $ 0.23
======== ======= ======= =======
</TABLE>

The effect of stock options for the quarters with net losses is antidilutive
because of the net loss. In these cases, the diluted per share amounts equal the
basic per share amounts.

<PAGE>

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES

There were no changes in or disagreements with accountants on
accounting or financial disclosures within the last three fiscal years.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Incorporated herein by reference to the Company's definitive Proxy Statement to
be filed in connection with the 2000 Annual Meeting of Stockholders.

ITEM 11. EXECUTIVE COMPENSATION

Incorporated herein by reference to the Company's definitive Proxy Statement to
be filed in connection with the 2000 Annual Meeting of Stockholders.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Incorporated herein by reference to the Company's definitive Proxy Statement to
be filed in connection with the 2000 Annual Meeting of Stockholders.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Incorporated herein by reference to the Company's definitive Proxy Statement to
be filed in connection with the 2000 Annual Meeting of Stockholders.

<PAGE>

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

PAGE NUMBER OF
ANNUAL REPORT
ON FORM 10-K
------------

<S> <C>
(a) LIST OF DOCUMENTS FILED AS PART OF THIS REPORT

(1) FINANCIAL STATEMENTS

Report of Independent Auditors 21

Consolidated Balance Sheets as of June 30, 2000 and 1999 22

Consolidated Statements of Operations for each of the years
ended June 30, 2000, 1999 and 1998 23

Consolidated Statements of Cash Flows for each of the years
ended June 30, 2000, 1999 and 1998 24

Consolidated Statements of Stockholders' Equity for each of
the years ended June 30, 2000, 1999 and 1998 25

Notes to Consolidated Financial Statements 26

(2) FINANCIAL STATEMENT SCHEDULES

Consolidated Financial Statements Schedules as of and for each of the years
ended June 30, 2000, 1999 and 1998:

Schedule II Valuation and Qualifying Accounts 54

</TABLE>

All other Financial Statements Schedules have been omitted because they are not
required or are not applicable.

<PAGE>

(3) EXHIBITS (NUMBERED IN ACCORDANCE WITH ITEM 601 OF REGULATION S-K).

<TABLE>
<S> <C>
3.1-- Certificate of Incorporation of the Company. Incorporated by
reference to Exhibit 3.1 of Form S-1 filed January 20, 1994 (No.
33-72128).

3.2-- Certificate of Amendment of Certificate of Incorporation dated
February 2, 1995 decreasing aggregate number of authorized shares to
12,179,985. Incorporated by reference to Exhibit 3.2 of Form 10-K
filed November 30, 1995.

3.3-- Certificate of Designation.

3.4-- By-laws of the Company. Incorporated by reference to Exhibit 3.2 of
Form S-1 filed January 20, 1994 (No. 33-72128).

10.1-- 1994 Stock Option Plan of the Company. Incorporated by reference to
Exhibit B to the Company's Proxy Statement filed October 17, 1997.

10.2-- 401(k) Profit Sharing Plan of the Company. Incorporated by reference
to Exhibit 10.4 of Form S-1 filed January 20, 1994 (No. 33-72128).

*10.3-- Motor Carrier Transportation Agreement, dated February 1, 1987,
between Chrysler Motors Corporation and the Trucking Division, as
amended. Incorporated by reference to Exhibit 10.8 of Form 10-Q
filed November 14, 1996.

10.4-- Motor Carrier Transportation Agreement, effective as of October 1,
1993, between Chrysler Motors Corporation and Celadon Trucking
Services, Inc., as amended. Incorporated by reference to Exhibit
10.9 of Form 10-K filed October 14, 1994.

10.5-- Registration Rights Agreement, dated April 7, 1988, between Citicorp
Venture Capital, Ltd. and the Company. Incorporated by reference to
Exhibit 10.24 of Form S-1 filed January 20, 1994 (No. 33-72128).

10.6-- Stockholders' Agreement, dated April 7, 1988, among Citicorp Venture
Capital, Ltd., the Company, and the Stockholders set forth on
Schedule I thereto. Incorporated by reference to Exhibit 10.25 of
Form S-1 filed January 20, 1994 (No. 33-72128).

10.7-- Registration Rights Agreement, dated October 8, 1992, between the
Company and Hanseatic Corporation. Incorporated by reference to
Exhibit 10.30 of Form S-1 filed January 20, 1994 (No. 33-72128).

10.8-- Stockholders' Agreement, dated October 8, 1992, among the Company,
Stephen Russell, Leonard Bennett, and Hanseatic Corporation.
Incorporated by reference to Exhibit 10.31 of Form S-1 filed January
20, 1994 (No. 33-72128).

10.9-- Joint Venture Operating Agreement, effective as of September 1,
1993, between the Company and Grupo Hercel, S.A. de C.V.
Incorporated by reference to Exhibit 10.35 of Form S-1 filed January
20, 1994 (No. 33-72128).

</TABLE>

<PAGE>

<TABLE>

<S> <C>
10.10-- Employment Agreement between the Company and Stephen Russell.
Incorporated by reference to Exhibit 10.43 of Form S-1 filed January
20, 1994 (No. 33-72128).

10.11-- Partnership Agreement dated August 24, 1994, between Randy
International, Ltd. and Jacky Maeder, Ltd. Incorporated by reference
to Exhibit 10.30 of Form 10-K filed October 13, 1994.

10.12-- Non-Qualified Stock Option Agreement dated May 13, 1994, between
Celadon Group, Inc. and Norman Greif. Incorporated by reference to
Exhibit 10.32 of Form 10-K filed October 13, 1994.

10.13-- Amendment dated July 3, 1996 to Stockholders Agreement dated October
8, 1992 between Leonard R. Bennett, Stephen Russell, Hanseatic
Corporation and the Company. Incorporated by reference to Exhibit
10.43 of Form 10-Q filed November 14, 1996.

10.14-- 401 Profit Sharing Plan and Adoption Agreement of the Company.
Incorporated by reference to Exhibit 10.45 of Form 10-Q filed
February 12, 1997.

10.15-- Amendment dated February 12, 1997 to Employment Agreement dated
January 21, 1994 between the Company and Stephen Russell.
Incorporated by reference to Exhibit 10.50 of Form 10-K filed
September 12, 1997.

10.16-- Celadon Group, Inc. Non-Employee Director Stock Option Plan.
Incorporated by reference to Exhibit A to the Company's Proxy
Statement filed October 17, 1997.

10.17-- Amendment No. 2 dated August 1, 1997 to Employment Agreement dated
January 21, 1994 between the Company and Stephen Russell.
Incorporated by reference to Exhibit 10.55 of Form 10-Q filed
February 11, 1998.

10.18-- Employment Agreement dated October 30, 1997 between Michael Archual
and CTSI. Incorporated by reference to Exhibit 10.56 of Form 10-K
filed September 25, 1998.

10.19-- Amendment No. 1 dated June 28, 1998 to Employment Agreement between
CTSI and Michael Archual. Incorporated by reference to Exhibit 10.59
of Form 10-K filed September 25, 1998.

10.20-- $60,000,000 Credit Agreement dated August 11, 1999 among the
Company, and Celadon Trucking Services, Inc., and ING (U.S.) Capital
LLC. Incorporated by reference to Exhibit 10.61 of Form 10-Q
filed November 15, 1999.

10.21-- $5,000,000 First Amendment Credit Agreement dated November 5, 1999
among the Company, and Celadon Trucking Services, Inc. and ING
(U.S.) Capital LLC. Incorporated by reference to Exhibit 10.62 of
Form 10-Q filed February 14, 2000.

10.22-- Second Amendment Credit Agreement dated February 17, 2000 between
the Company and Celadon Trucking Services, Inc. and ING (U.S.)
Capital LLC.

10.23-- Third Amendment Credit Agreement dated May 11, 2000 between the
Company and Celadon Trucking Services, Inc. and ING (U.S.) Capital
LLC.

10.24-- $2,000,000 Fourth Amendment Credit Agreement dated September 6, 2000
between the Company and Celadon Trucking Services, Inc. and ING
(U.S.) Capital LLC.

10.25-- Stockholder Rights Plan for the Company Incorporated by reference to
Exhibit 4.1 of Form 8-A filed July 20, 2000.

21 -- Subsidiaries.

23 -- Consent of Ernst & Young LLP.

27 -- Financial Data Schedule.

</TABLE>

-----------------
*Confidential treatment for portions of this Exhibit has been granted pursuant
to Rule 24b-2 of the Securities Exchange Act of 1934.

<PAGE>

(4) REPORTS ON FORM 8-K.

No Current Reports on Form 8-K were filed during the three months ended
June 30, 2000.

(5) EXHIBITS.

The exhibits required to be filed with this Annual Report on Form-10-K
pursuant to Item 601 of Regulation S-K are listed under "Exhibits" in Part
IV, Item 14(a)(3) of this Annual Report on Form 10-K, and are incorporated
herein by reference.

<PAGE>

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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 this September 28,
2000.

Celadon Group, Inc.

By: /s/ Stephen Russell
-------------------------------
STEPHEN RUSSELL
CHAIRMAN OF THE BOARD, PRESIDENT
AND CHIEF EXECUTIVE OFFICER

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Stephen Russell Chairman of the Board, President September 28, 2000
------------------------------------ and Chief Executive Officer (Principal
(STEPHEN RUSSELL) Executive Officer)

/s/ Paul A. Will Vice President, Chief Financial Officer September 28, 2000
------------------------------------ (Principal Accounting Officer)
(PAUL A. WILL)

/s/ Michael W. Dunlap Vice President, Treasurer (Principal September 28, 2000
------------------------------------ Financial Officer)
(MICHAEL W. DUNLAP)

/s/ Paul A. Biddelman Director September 28, 2000
------------------------------------
(PAUL A. BIDDELMAN)

/s/ Michael Miller Director September 28, 2000
------------------------------------
(MICHAEL MILLER)

/s/ Kilin To Director September 28, 2000
------------------------------------
(KILIN TO)

/s/ Anthony Heyworth Director September 28, 2000
------------------------------------
(ANTHONY HEYWORTH)

/s/ John Kines Director September 28, 2000
------------------------------------
(JOHN KINES)
</TABLE>

<PAGE>

SCHEDULE II

CELADON GROUP, INC.
VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED JUNE 30, 2000, 1999, AND 1998

<TABLE>
<CAPTION>
Balance at Charged to Balance at
Beginning Costs and Other End of
Description of Period Expenses Additions Deductions Period
----------- --------- -------- --------- ---------- ------
<S> <C> <C> <C> <C> <C>
YEAR ENDED JUNE 30, 1998:

Allowance for doubtful
accounts $2,773,354 $249,780 100,406 (c) $2,595,295 (a) $ 528,245
========== ======== ========== ========== ==========
Reserves for claims
payable as self insurer $1,815,950 $2,871,407 --- $2,703,109 (b) $1,984,248
========== ========== ========== ========== ==========

YEAR ENDED JUNE 30, 1999:

Allowance for doubtful
accounts $528,245 $716,073 --- $456,130 (a) $788,188
======== ======== ========== ======== ========
Reserves for claims
payable as self insurer $1,984,248 $2,666,551 --- $3,626,479 (b) $1,024,320
========== ========== ========== ========== ==========

YEAR ENDED JUNE 30, 2000:
Allowance for doubtful
accounts $788,188 $493,621 --- $495,389 (a) $786,420
======== ======== ========== ======== ========
Reserves for claims
payable as self insurer $1,024,320 $3,856,668 --- $2,689,773 (b) $2,191,215
========== ========== ========== ========== ==========
</TABLE>
-------------------
(a) Represents accounts receivable write-offs.
(b) Represents claims paid.
(c) Represents allowances for doubtful accounts of acquired companies at dates
of acquisitions.

<PAGE>

CELADON GROUP, INC.
FORM 10-K

TABLE OF EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT PAGE
------- ----
<S> <C>
EXHIBIT 3.3 56

EXHIBIT 10.22 61

EXHIBIT 10.23 67

EXHIBIT 10.24 77

EXHIBIT 10.25 99

EXHIBIT 21 157

EXHIBIT 23 158

EXHIBIT 27 159
</TABLE>