- ------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE PERIOD ENDED SEPTEMBER 30, 2000 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 COMMISSION FILE NUMBER: 0-23192 CELADON GROUP, INC. (Exact name of Registrant as specified in its charter) DELAWARE 13-3361050 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) ONE CELADON DRIVE INDIANAPOLIS, IN 46235-4207 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (317) 972-7000 Indicate by check mark whether the Registrant (1) has filed all reports required by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- The number of shares outstanding of the Common Stock ($.033 par value) of the Registrant as of the close of business on November 14, 2000 was 7,788,242. CELADON GROUP, INC. INDEX TO SEPTEMBER 30, 2000 FORM 10-Q PART I. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) Condensed Consolidated Balance Sheets at September 30, 2000 and June 30, 2000....................................................................3 Condensed Consolidated Statements of Operations - For the three months ended September 30, 2000 and 1999....................................................4 Condensed Consolidated Statements of Cash Flows - For the three months ended September 30, 2000 and 1999....................................................5 Notes to Condensed Consolidated Financial Statements ................................6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations....................................................11 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K.............................................14 2 PART I - FINANCIAL INFORMATION CELADON GROUP, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (DOLLARS IN THOUSANDS) SEPTEMBER 30, JUNE 30, 2000 2000 ---- ---- (UNAUDITED) A S S E T S Current assets: Cash and cash equivalents................................................................... $752 $360 Trade receivables, net of allowance ........................................................ 54,068 53,521 Accounts receivable - other................................................................. 7,658 8,013 Prepaid expenses and other current assets................................................... 9,039 8,280 Tires in service ........................................................................... 4,532 4,747 Income tax recoverable...................................................................... 1,912 1,639 Deferred income tax ....................................................................... 802 802 -------- -------- Total current assets ................................................................ 78,763 77,362 Property and equipment, at cost ................................................................. 153,672 150,119 Less accumulated depreciation and amortization................................................... 36,330 37,477 -------- -------- Net property and equipment........................................................ 117,342 112,642 Tires in service ................................................................................ 2,579 2,569 Goodwill, net of accumulated amortization........................................................ 20,047 20,435 Other assets..................................................................................... 2,134 2,314 -------- -------- Total assets................................................................................ $220,865 $215,322 ======== ======== 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............................................................................ $5,978 $5,669 Accrued expenses ........................................................................... 24,829 26,819 Bank borrowings and current maturities of long-term debt.................................... 6,963 7,055 Current maturities of capital lease obligations............................................. 16,192 15,732 -------- -------- Total current liabilities.............................................................. 53,962 55,275 Long-term debt, net of current maturities ....................................................... 49,633 49,751 Capital lease obligations, net of current maturities............................................. 50,133 42,908 Deferred income tax.............................................................................. 8,862 8,862 Minority interest................................................................................ 107 119 Commitments and contingencies.................................................................... Stockholders' equity: Preferred stock, $1.00 par value, authorized 179,985 shares, issued and outstanding zero shares................................................................... --- --- Common stock, $.033 par value, authorized 12,000,000 shares; issued 7,789,764 and 7,786,430 shares at September 30, 2000 and June 30, 2000, respectively.................. 257 257 Additional paid-in capital.................................................................. 60,154 60,113 Retained earnings........................................................................... (1,192) (722) Accumulated other comprehensive loss........................................................ (1,036) (1,206) Treasury stock, at cost, 1,522 and 3,523 shares at September 30, 2000 and June 30, 2000, respectively .......................................................... (15) (35) -------- -------- Total stockholders' equity.................................................................. 58,168 58,407 -------- -------- Total liabilities and stockholders' equity............................................ $220,865 $215,322 ======== ======== See accompanying notes to condensed consolidated financial statements. 3 CELADON GROUP, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS EXCEPT PER SHARE AMOUNTS) (UNAUDITED) FOR THE THREE MONTHS ENDED SEPTEMBER 30, -------------------------- 2000 1999 ---- ---- Operating revenue........................................................... $88,427 $82,665 ------- ------- Operating expenses: Salaries, wages and employee benefits.................................. 23,615 23,315 Fuel................................................................... 10,010 7,930 Operating costs and supplies........................................... 6,989 6,053 Insurance and claims................................................... 2,183 2,255 Depreciation and amortization.......................................... 3,761 3,243 Rent and purchased transportation...................................... 34,182 29,691 Professional and consulting fees....................................... 533 402 Cost of goods sold..................................................... 595 --- Communications and utilities........................................... 1,007 1,155 Permits, licenses and taxes .......................................... 1,562 1,509 General, administrative and selling.................................... 2,241 2,697 ------- ------- Total operating expenses............................................... 86,678 78,250 ------- ------- Operating income ........................................................... 1,749 4,415 ------- ------- Other (income) expense: Interest income........................................................ (36) (28) Interest expense....................................................... 2,359 2,030 Other expense, net..................................................... 33 89 Minority interest in subsidiary loss................................... (12) -- Loss on disposition of equipment....................................... --- 3,266 ------- ------- Income before income taxes............................................. (595) (942) Benefit for income taxes .............................................. (125) (353) ------- ------- Net loss............................................................. $(470) $ (589) ======= ======= Earnings (loss) per common share: Diluted earnings per share........................................... $(0.06) $(0.08) Basic earnings per share............................................. $(0.06) $(0.08) Average shares outstanding: Diluted.............................................................. 7,783,603 7,771,956 Basic................................................................ 7,783,603 7,771,956 See accompanying notes to condensed consolidated financial statements. 4 CELADON GROUP, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS ( DOLLARS IN THOUSANDS) (UNAUDITED) FOR THE THREE MONTHS ENDED SEPTEMBER 30, -------------------------- 2000 1999 ---- ---- Cash flows from operating activities: Net loss.............................................................. $(470) $(589) Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization....................................... 3,761 3,243 Loss on disposition of equipment.................................... --- 3,266 Provision for deferred income taxes................................. --- (1,217) Provision for doubtful accounts..................................... 203 179 Changes in assets and liabilities: Trade receivables................................................ (750) (4,048) Accounts receivable -- other..................................... 355 (220) Income tax recoverable........................................... (273) 67 Tires in service................................................. 205 (854) Prepaid expenses and other current assets........................ (759) (2,041) Other assets..................................................... 266 (78) Accounts payable and accrued expenses............................ (1,681) (1,835) Income taxes payable ........................................... --- 1,381 ------- ------- Net cash provided by (used for) operating activities............. 857 (2,746) Cash flows from investing activities: Purchase of property and equipment.................................. (3,257) (5,277) Proceeds on sale of property and equipment.......................... 7,970 5,674 Purchase of business, net of cash................................... --- (25,554) ------- ------- Net cash provided by (used for) investing activities............ 4,713 (25,157) Cash flows from financing activities: Proceeds from issuances of common stock............................. 43 200 Proceeds from issuance common stock in subsidiary................... 6 --- Proceeds from bank borrowings and debt.............................. 1,475 35,066 Payments of bank borrowings and debt ............................... (1,685) (3,742) Principal payments under capital lease obligations.................. (5,017) (3,284) ------- ------- Net cash provided by (used for) financing activities ........... (5,178) 28,240 ------- ------- Increase in cash and cash equivalents................................. 392 337 Cash and cash equivalents at beginning of year........................ 360 695 ------- ------- Cash and cash equivalents at end of period............................ $ 752 $1,032 ======= ====== See accompanying notes to condensed consolidated financial statements. 5 CELADON GROUP, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2000 (UNAUDITED) (1) BASIS OF PRESENTATION The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial reporting and the general instructions to Form 10-Q of Regulation S-X and includes the results of Celadon Group, Inc. and it's majority owned subsidiaries. Accordingly, they do not include certain information and note disclosures required by generally accepted accounting principles for annual financial reporting and should be read in conjunction with the consolidated financial statements and notes thereto of Celadon Group, Inc. (the "Company") as of and for each of the three years in the period ended June 30, 2000. The unaudited interim financial statements reflect all adjustments (all of a normal recurring nature) which management considers necessary for a fair presentation of the financial condition and results of operations for these periods. The results of operations for the interim period are not necessarily indicative of the results that may be reported for the full year. The preparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. (2) 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, Celadon Trucking Services, Inc., ("CTSI"), Servicios de Transportacion Jaguar, S.A. de C.V., ("Jaguar"), Gerth Transport Ltd. ("Gerth"), Zipp Express, Inc., ("Zipp") and Cheetah Transportation, Inc., ("Cheetah"). The Company began providing certain services over the internet through its e-commerce subsidiary TruckersB2B, Inc., ("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 its operating segments on operating results. As the e-commerce segment began in February 2000, there is no reportable information for this segment for the first quarter of fiscal year 2000 for comparison. 6 CELADON GROUP, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) SEPTEMBER 30, 2000 (UNAUDITED) FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2000 ------------------ (DOLLARS IN THOUSANDS) TRANSPORTATION E-COMMERCE TOTAL -------------- ---------- ----- Revenue from external customers............. $87,518 $909 $88,427 Operating income (loss)..................... 2,435 (686) 1,749 Interest revenue............................ 36 --- 36 Interest expense ........................... 2,328 31 2,359 Other expense (income)...................... 33 (12) 21 Income (loss) before income taxes........... $110 $(705) $(595) Information as to the Company's operations by geographic area is summarized below: FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2000 ------------------ (DOLLARS IN THOUSANDS) 2000 1999 ---- ---- Operating revenue: United States............................ $70,355 $66,236 Canada................................... 13,445 13,442 Mexico................................... 4,627 2,987 ------- ------- Total ............................... $88,427 $82,665 ======= ======= The Company's largest customer is DaimlerChrysler, which accounted for approximately 19% and 23% of the Company's total truckload revenue for the three months ended September 30, 2000 and 1999, 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 2003, and (c) an international contract with the Freightliner division, which expires in April 2001. The two Chrysler division agreements accounted for approximately 18% and 20% of the Company's total truckload revenue for the three months ended September 30, 2000 and 1999, respectively. The Freightliner division contract accounted for approximately 1% and 3% of the Company's total revenue for the three months ended September 30, 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. 7 CELADON GROUP, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) SEPTEMBER 30, 2000 (UNAUDITED) (3) INCOME TAXES The effective tax rates, pertaining to the tax benefits, for operations for the three-months ended September 30, 2000 and 1999 were 21% and 38%, respectively. The reduced tax rate for fiscal 2001 is primarily related to permanent tax differences and Mexican taxes being based on assets in lieu of income. (4) COMPREHENSIVE INCOME Total comprehensive income (loss) was $0.2 million and $(0.6) million for the three months ended September 30, 2000 and 1999, respectively. The difference between the total comprehensive income (loss) and net loss relates to the effect of foreign currency translation adjustments. (5) 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 a $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 amended to increase the loan by $2 million to $67 million, primarily to finance the operations of TruckersB2B. This amendment expired on October 31, 2000. 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. (6) HEDGING ACTIVITIES, COMMITMENTS AND CONTINGENCIES The Company has outstanding commitments to purchase approximately $12.8 million of revenue equipment at September 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 $1.2 million at September 30, 2000. There are various claims, lawsuits and pending actions against the Company and its subsidiaries in the normal course of the operations of its business. The Company believes many of these proceedings are covered in whole or in part by insurance and that none of these matters will have a material adverse effect on its consolidated financial position. 8 CELADON GROUP, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) SEPTEMBER 30, 2000 (UNAUDITED) 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. In June 1998, the Financial Accounting Standards Board issued Statement No. 133, Accounting for Derivative Instruments and Hedging Activities, and its amendments Statements 137 and 138, in June 1999 and June 2000, respectively. The statement requires the Company to recognize all derivatives on the balance sheet at fair value. Derivatives that are not hedges must be adjusted to fair value through income. If the derivative is a hedge, depending on the nature of the hedge, changes in the fair value of derivatives are offset against the change in fair value of assets, liabilities or firm commitments through earnings or recognized in other comprehensive income until the hedged item is recognized in earnings. The adoption of Statement No. 133 on July 1, 2000 resulted in no cumulative effect change in the income statement or other comprehensive income, as the Company had no derivatives in place on that date. The Company has entered into three exchange traded petroleum futures contracts, beginning October 1, 2000. There was no earnings impact in the September 2000 quarter. (7) SUPPLEMENTAL CASH FLOW INFORMATION During the three months ended September 30, 2000 and 1999, lease obligations in the amount of $12.7 million and $2.6 million, respectively, were incurred to lease revenue equipment and the associated tires in service. During the three months ended September 30, 2000 and 1999, the Company made interest payments of $2.4 million and $1.9 million, respectively. 9 CELADON GROUP, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) SEPTEMBER 30, 2000 (UNAUDITED) (8) EARNINGS PER SHARE The following is a reconciliation of the numerators and demoninators used in computing earnings per share (in thousands except for per share amounts): FOR THE THREE MONTHS ENDED SEPTEMBER 30, ------------ 2000 1999 ---- ---- Loss available to common shareholders......................... $(470) $(589) ====== ====== Basic loss per share: Weighted - average number of common shares outstanding ................................... 7,783,603 7,771,956 Basic loss per share ................................... $(0.06) $(0.08) ====== ====== Diluted loss per share: Weighted - average number of common shares outstanding ................................... 7,783,603 7,771,956 Effect of stock options and other incremental shares..... --- --- --------- --------- Weighted - average number of common shares outstanding-diluted ................................... 7,783,603 7,771,956 ========= ========= Diluted loss per share ................................... $(0.06) $(0.08) ======= ======= Diluted loss per share for the three months ended September 30, 2000 and 1999 does not include the anti-dilutive effect of 115 thousand and 4 thousand stock options and other incremental shares, respectively. (9) SUBSEQUENT EVENTS In November 2000, the Company decided not to pursue an initial public offering of TruckersB2B. Approximately $800,000 of deferred costs associated with the attempted initial public offering have been expensed in the second quarter of fiscal 2001. TruckersB2B has issued an additional 600,000 shares of TruckersB2B Class A common stock to a strategic partner as of October 20, 2000. These shares were issued for assistance provided to TruckersB2B to enroll members and supply member data. This transaction will be expensed as non-cash member and vendor development fees based on a valuation to be determined in the second quarter of fiscal 2001. 10 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FORWARD-LOOKING STATEMENTS This Report on Form 10-Q contains forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such comments are based upon information currently available to management and management's perception thereof as of the date of this report being filed. Actual results of the Company's operations could materially differ from those forward looking statements. Such differences could be caused by a number of factors including, but not limited to, potential adverse affects of regulation and litigation; changes in competition and the effects of such changes; increased competition; changes in fuel prices; changes in economic, political or regulatory environments; changes in the availability of a stable labor force; ability of the Company to hire drivers meeting Company standards; changes in management strategies; environmental or tax matters; and risks described from time to time in reports filed by the Company with the Securities and Exchange Commission. Readers should take these factors into account in evaluating any such forward looking statements. RECENT DEVELOPMENTS On February 7, 2000, Celadon Group, Inc. announced the formation of TruckersB2B, Inc. ("TruckersB2B"). TruckersB2B provides cost benefits for truck owners in such areas as fuel, tires, parts, calling cards, insurance, trailer leasing, credit cards, and tractor financing. TruckersB2B is owned by Celadon E-Commerce, Inc., a wholly owned subsidiary of Celadon Group, Inc. and GE Capital, as well as several venture funds. TruckersB2B, as of September 30, 2000, had over 225,000 member trucks enrolled, represented by over 6,000 separate companies in the U.S. and Canada. The board of directors of Celadon Group had authorized the management of TruckersB2B to proceed with an initial public offering but in view of current market conditions, the Company has decided not to pursue a public offering at this time. TruckersB2B accounted for $0.06 per share of the September 2000 quarter loss, which related to marketing and administrative costs associated with operating this business. RESULTS OF OPERATIONS THREE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED WITH THE THREE MONTHS ENDED SEPTEMBER 30, 1999 Revenue. Consolidated revenue increased by $5.7 million, or 6.9%, to $88.4 million for fiscal 2001 from $82.7 million for fiscal 2000. Higher revenue was related to an increase in rate per mile, primarily relating to fuel surcharges. In addition, revenue increased related to the Zipp Logistics dedicated warehousing operations for Cummins and Navistar and billings to customers for the Mexican portion of transportation. Revenue includes approximately $900 thousand in fiscal 2001 from TruckersB2B. The TruckersB2B revenue for the September 2000 quarter represents over $25 million in purchases made by its 11 member companies through the TruckersB2B network. The number of tractors operated by the Company, including 1,012 owner-operated tractors, increased to 2,664 at September 30, 2000, compared to 2,557, including 964 owner-operated tractors, at September 30, 1999. Operating Income. Consolidated operating income decreased by $2.7 million, or 61.4%, to $1.7 million in fiscal 2001 from $4.4 million in fiscal 2000. The decrease in operating income was primarily a result of TruckersB2B operating expenses, in addition to increases in fuel costs, rent and purchased transportation and other direct operating expenses. The Company's operating ratio, which expresses operating expenses as a percentage of operating revenue increased from 94.7% in fiscal 2000 to 97.2%, excluding TruckersB2B, in fiscal 2001. In the September 2000 quarter, TruckersB2B recorded a $686 thousand operating loss primarily related to marketing costs and salaries. In the truckload segment, the most significant cost increase was fuel expense. In the September 2000 quarter, fuel costs increases net of customer surcharges resulted in additional expense of approximately $850 thousand (pre-tax) or approximately $0.07 per share compared to prior year. Fuel costs rose at the pump approximately 27% and the Company instituted a fuel reimbursement to the owner-operators which increased expenses approximately $650 thousand. This fuel reimbursement to the owner-operator is included in the net fuel cost increase described above. These increases were partially offset by fuel surcharges to our customers. In a market of escalating fuel prices, fuel surcharges lag fuel cost increases. The Company does not recover additional fuel expense related to deadhead mileage or idle time from customers in the form of fuel surcharges. Purchased transportation expenses increased due to increased logistics expense, Mexico purchased transportation and owner-operator fleet capacity. Expenses for logistics and Mexico purchased transportation increased in relation to revenue for these types of transportation business. The Company's owner-operator fleet increased from 964 in fiscal 2000 to 1,012 in fiscal 2001, which increased the Company's owner-operator capacity and related expense. In addition, trailer and tractor rental costs have increased. The trailer costs have increased approximately $475 thousand related to replacing 48 foot trailers with 53 foot trailers. The Company added 239 units as operating lease tractors in its fleet since the September 1999 quarter, for an increased operating expense of approximately $600 thousand. The Company has disposed of approximately 300 units which were comprised of both operating and capital leased equipment since the prior year. Net Interest Expense. Net interest expense increased by $0.3 million, or 15.0%, to $2.3 million in fiscal 2001 from $2.0 million in fiscal 2000. The increase was the result of additional borrowings under the Company's credit facilities. Income Taxes. Benefit for income taxes decreased to $0.1 million in fiscal 2001 from $0.4 million in fiscal 2000. The Company's effective tax rate was 21% in fiscal 2001 and 38% in fiscal 2000. The reduced tax rate for fiscal 2001 is primarily related to permanent tax differences and Mexican taxes being based on assets in lieu of income. 12 LIQUIDITY AND CAPITAL RESOURCES The Company's primary capital requirements in fiscal 2001 will be for the acquisition of revenue equipment. The Company has financed its capital requirements by obtaining lease financing on revenue equipment. At September 30, 2000, the Company had an aggregate of $66.3 million in capital lease financing at interest rates ranging from 5.3% to 8.0%, maturing at various dates through 2005. Of this amount, $16.2 million is due prior to September 30, 2001. 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. As of September 30, 2000, the Company had on order revenue equipment representing an aggregate capital commitment of approximately $12.8 million. 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. In August 1999, the Company completed a $60 million banking facility ("credit agreement") with ING (U.S.) Capital LLC. The arrangement includes a $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 amended to increase the loan by $2 million to $67 million, primarily to finance the operations of TruckersB2B. This amendment expired on October 31, 2000. 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. 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 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 could result in higher operating costs. The effects of inflation on the Company's business during fiscal 2001 and 2000 generally were not significant. 13 PART II - OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits Exhibit 27 - Financial Data Schedule (b) Form 8-K Report on Form 8-K dated July 20, 2000 with relation to the Stockholder's Rights Plan dated July 20, 2000. 14 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. CELADON GROUP, INC. (Registrant) /s/ Stephen Russell ------------------- Stephen Russell, Chief Executive Officer /s/ Paul A. Will ---------------- Paul A. Will Chief Financial Officer Date: November 14, 2000 15