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, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number: 0-23192
CELADON GROUP, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 13-3361050
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
9503 East 33rd Street
One Celadon Drive
Indianapolis, IN 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 12, 1999 was 7,786,430.
CELADON GROUP, INC.
Index to
September 30, 1999 Form 10-Q
Part I. Financial Information
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheet at September 30, 1999
and June 30, 1999......................................................................................3
Condensed Consolidated Statement of Operations - For the three months
ended September 30, 1999 and 1998......................................................................4
Condensed Consolidated Statement of Cash Flows - For the three months ended
September 30, 1999 and 1998............................................................................5
Notes to Condensed Consolidated Financial Statements ..................................................6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations......................................................................11
Part II. Other Information
Item 5. Other..........................................................................................15
Item 6. Exhibits and Reports on Form 8-K...............................................................15
2
Part I - Financial Information
CELADON GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
September 30, June 30,
1999 1999
---- ----
(unaudited)
A S S E T S
Current assets:
Cash and cash equivalents ............................................. $ 1,032 $ 695
Trade receivables, net of allowance ................................... 52,343 43,884
Accounts receivable - other ........................................... 5,652 5,336
Prepaid expenses and other current assets ............................. 9,649 6,941
Tires in service ...................................................... 4,863 4,179
Income tax recoverable ................................................ -- 29
Deferred income tax ................................................... 6,067 4,847
--------- ---------
Total current assets ........................... 79,606 65,911
--------- ---------
Property and equipment, at cost ............................................ 147,883 141,213
Less accumulated depreciation and amortization ........................ 32,901 33,629
--------- ---------
Net property and equipment .................................. 114,982 107,584
--------- ---------
Tires in service ........................................................... 2,373 2,331
Goodwill, net of accumulated amortization .................................. 20,749 10,967
Other assets ............................................................... 2,605 1,966
--------- ---------
Total assets .......................................................... $ 220,315 $ 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 ...................................................... $ 6,080 $ 5,505
Accrued expenses ...................................................... 20,253 17,953
Bank borrowings and current maturities of long-term debt .............. 5,452 7,239
Current maturities of capital lease obligations ....................... 13,259 15,099
Income tax payable .................................................... 1,381 --
--------- ---------
Total current liabilities ....................................... 46,425 45,796
--------- ---------
Long-term debt, net of current maturities .................................. 51,723 18,613
Capital lease obligations, net of current maturities ....................... 51,145 52,967
Deferred income tax ........................................................ 14,068 14,065
--------- ---------
Total liabilities ..................................................... 163,361 131,441
--------- ---------
Minority interest .......................................................... 12 12
Commitments and contingencies .............................................. -- --
Stockholders' equity:
Preferred stock, $1.00 par value, authorized 179,985 shares, issued and
outstanding zero shares ............................................. -- --
Common stock, $.033 par value, authorized 12,000,000 shares;
issued 7,786,430 shares at September 30, 1999 and June 30, 1999 ....... 257 257
Additional paid-in capital ............................................ 56,632 56,679
Retained earnings ..................................................... 731 1,319
Accumulated other comprehensive income ................................ (581) (605)
Treasury stock, at cost, 9,873 and 34,773 shares at September 30, 1999
and June 30, 1999, respectively ..................................... (97) (344)
--------- ---------
Total stockholders' equity ...................................... 56,942 57,306
--------- ---------
Total liabilities and stockholders' equity ...................... $ 220,315 $ 188,759
========= =========
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,
---------------------------------
1999 1998
---- ----
Operating revenue ........................ $ 82,665 $ 72,113
----------- -----------
Operating expenses:
Salaries, wages and employee benefits 23,315 19,190
Fuel ................................ 7,930 6,954
Operating costs and supplies ........ 6,053 6,588
Insurance and claims ................ 2,255 1,569
Depreciation and amortization ....... 3,243 3,567
Rent and purchased transportation ... 29,691 25,141
Professional and consulting fees .... 402 305
Communications and utilities ........ 1,155 1,004
Permits, licenses and taxes ......... 1,509 1,344
General, administrative and selling . 2,697 2,156
----------- -----------
Total operating expenses .......... 78,250 67,818
----------- -----------
Operating income ......................... 4,415 4,295
----------- -----------
Other (income) expense:
Interest income ..................... (28) (95)
Interest expense .................... 2,030 1,995
Other expense, net .................. 89 (62)
Loss on disposition of equipment .... 3,266 --
----------- -----------
Income before income taxes .......... (942) 2,457
Provision for income taxes (benefit) (353) 925
----------- -----------
Net income (loss) ................. $ (589) $ 1,532
=========== ===========
Earnings (loss) per common share:
Diluted earnings per share ........ $ (0.08) $ 0.20
Basic earnings per share .......... $ (0.08) $ 0.20
Average shares outstanding:
Diluted ........................... 7,775,783 7,851,186
Basic ............................. 7,771,956 7,726,663
See accompanying notes to condensed consolidated financial statements.
4
CELADON GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollar amounts in thousands)
(Unaudited)
For the three months ended
September 30,
---------------------------
1999 1998
---- ----
Cash flows from operating activities:
Net income (loss) ....................................... $ (589) $ 1,532
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization ....................... 3,243 3,567
Loss on disposition of equipment ....................... 3,266 --
Provision for deferred income taxes .................... (1,217) 284
Provision for doubtful accounts ........................ 179 187
Changes in assets and liabilities:
Trade receivables ................................... (4,048) (1,412)
Accounts receivable -- other ........................ (220) (362)
Income tax recoverable .............................. 67 656
Tires in service .................................... (854) (633)
Prepaid expenses and other current assets ........... (2,041) (390)
Other assets ........................................ (78) (115)
Accounts payable and accrued expenses ............... (1,835) (2,013)
Income taxes payable ................................ 1,381 --
-------- --------
Net cash provided by (used for) operating activities (2,746) 1,301
-------- --------
Cash flows from investing activities:
Proceeds on sale of property and equipment ............. 5,681 676
Purchase of property and equipment ..................... (5,277) (5,134)
Purchase of business, net of cash ...................... (25,554) --
Deposits ............................................... (7) 37
-------- --------
Net cash used for investing activities ............. (25,157) (4,421)
Cash flows from financing activities:
Proceeds from issuances of common stock ................ -- 51
Proceeds from issuance treasury stock .................. 200 --
Proceeds from bank borrowings and debt ................. 35,066 6,553
Payments of bank borrowings and debt ................... (3,742) (2,231)
Principal payments under capital lease obligations ..... (3,284) (3,446)
-------- --------
Net cash provided by financing activities .............. 28,240 927
-------- --------
Increase (decrease) in cash and cash equivalents ......... 337 (2,193)
Cash and cash equivalents at beginning of year ........... 695 2,537
-------- --------
Cash and cash equivalents at end of period ............... $ 1,032 $ 344
======== ========
See accompanying notes to condensed consolidated financial statements.
5
CELADON GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1999
(Unaudited)
(1) Basis of Presentation
The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with generally accepted
accounting principles for interim financial reporting and the general
instructions to Form 10-Q of Regulation S-X. Accordingly, they do not
include certain information and note disclosures required by generally
accepted accounting principles for annual financial reporting and
should be read in conjunction with the consolidated financial
statements and notes thereto of Celadon Group, Inc. (the "Company") as
of and for each of the three years in the period ended June 30, 1999.
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) Geographical Information and Significant Customers
The Company predominately operates and provides its transportation
services in the truckload transportation segment of the transportation
industry. The Company generates revenue from its truckload operations
in the United States, Canada and Mexico.
6
Information as to the Company's operations by geographic area is summarized
below (in thousands):
For the three months ended
September 30,
---------------------------
1999 1998
---- ----
Operating revenue:
United States ............. $ 66,236 $ 56,753
Canada .................... 13,442 12,044
Mexico .................... 2,987 3,316
--------- ---------
Total .............. $ 82,665 $ 72,113
========= =========
Income (loss) before income taxes:
United States ............. $ (2,496) $ 1,277
Canada .................... 1,112 843
Mexico .................... 442 337
--------- ---------
Total .............. $ (942) $ 2,457
========= =========
Total assets:
United States ............. $ 194,631 $ 175,908
Canada .................... 18,224 14,835
Mexico .................... 7,460 4,316
--------- ---------
Total .............. $ 220,315 $ 195,059
========= =========
Revenue from DaimlerChrysler accounted for 23%, and 24% of the Company's
total revenue for the three months ended September 30, 1999 and 1998,
respectively. The Company transports DaimlerChrysler after-market replacement
parts and accessories within the United States and DaimlerChrysler original
equipment automotive parts primarily between the United States and the Mexican
border, which accounted for 28% and 72%, respectively, of the Company's revenue
from DaimlerChrysler for the three months ended September 30, 1999 and 1998.
DaimlerChrysler business is covered by three agreements, one of which covers the
United States-Mexican business for the Chrysler division, one of which covers
the United States-Mexican business for the Freightliner division and the last of
which covers domestic movements. The international contract, which covers the
Chrysler division, expires in December 1999. The international contract, which
covers the Freightliner division, expires in April 2001. The contract applicable
to domestic movements expires in October 2000.
Revenue from General Electric accounted for approximately 4% and 6% of
the Company's total revenue for the three months ended September 30, 1999 and
1998, respectively. General Electric business is covered by a contract, which
expires in August 2002, and that covers all loads shipped for General Electric
Industrial Control Systems ("GEICS").
7
CELADON GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED STATEMENTS -- (CONTINUED)
(Dollar amounts in thousands)
(Unaudited)
(3) Income Taxes
The effective tax rates for continuing operations for both the
three-month periods ending September 30, 1999 and 1998 was 38%. The Company's
effective tax rate differs from the statutory federal tax rate of 35% due to
state income taxes and certain expenses, which are not deductible for income tax
purposes.
(4) Comprehensive Income
Total comprehensive income (loss) was $(0.6) million and $1.1 million
for the three months ended September 30, 1999 and 1998, respectively. The
difference between the total comprehensive loss and net income (loss) is foreign
currency translation adjustments.
(5) Acquisitions
Effective July 1,1999, the Company acquired the assets and assumed
certain liabilities of Zipp Express, Inc. for approximately $26 million. The
Company accounted for the transaction as a purchase.
Assuming the transaction described above was consummated as of the
beginning of the three month period ended September 30, 1998, and after giving
effect to certain pro forma adjustments, the pro forma consolidated results of
operations for the three months ended September 30, 1998 would be as follows:
For the three
months ended
September 30, 1998
------------------
(Dollar amounts in thousands except per share data)
Operative revenue.................................... $81,247
Net income........................................... $ 1,645
Net income per common share.......................... $ 0.21
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. The effect of upgrading the Company's fleet through this disposition
resulted in a non-cash charge of approximately $3.2 million in the three months
ended September 30, 1999.
(6) Lines of Credit
In August 1999, the Company completed a new $60 million banking
facility with ING Barings. The new arrangement includes a $30 million revolving
loan and a $30 million term loan. The new banking arrangement was obtained to
finance the $26 million asset purchase of Zipp Express, Inc.
8
(7) Hedging Activities, Commitments and Contingencies
The Company has outstanding commitments to purchase approximately
$13.2 million of revenue equipment at September 30, 1999.
Standby letters of credit, not reflected in the accompanying
consolidated financial statements, aggregated approximately $1.8 million at
September 30, 1999.
The Company, from time-to-time, has entered into arrangements to
protect against fluctuations in the price of the fuel used by its trucks. As of
September 30, 1999, the Company had contracts to purchase fuel for future
physical delivery in the months of October 1999 through March 2000. These
contracts represent approximately 6% of the anticipated fuel requirements for
those months. Additionally, the Company has periodically acquired
exchange-traded petroleum futures contracts and has engaged in various commodity
collar transactions. Gains and losses on transactions, not designated as hedges,
are recognized based on market value at the date of the financial statements.
Effective December 31, 1998, the Company liquidated all of its remaining hedge
positions. During the three months ended September 30, 1998, losses of $267,000
on futures contracts and commodity collar transactions were included in fuel
expense.
There are various claims, lawsuits and pending actions against the
Company and its subsidiaries incidental to the operation 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 has been assessed approximately $750,000 by the State of
Texas for Interstate Motor Carrier Sales and Use Tax for the period from April
1988 through June 1992. The Company disagrees with the State of Texas over the
method used by the state in computing such taxes and intends to vigorously
pursue all of its available remedies. On October 30, 1996, the company made a
payment of $1.1 million, under protest, which includes interest to the date of
payment and enables the Company to pursue resolution of the matter with the
State of Texas Attorney General. In fiscal 1997, the Company filed its Original
Petition against representatives of the State of Texas. The state responded and
denied the Company=s claims. As of September 30, 1999, the parties to the
litigation were exchanging discovery requests and documentation. The Company has
accrued an amount that management estimates is due based upon methods they
believe are appropriate. While there can be no certainty as to the outcome, the
Company believes that the ultimate resolution of this matter will not have a
material adverse effect on its consolidated financial position.
9
CELADON GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
September 30, 1999
(Dollar amounts in thousands)
(Unaudited)
(8) Supplemental Cash Flow Information
During the three months ended September 30, 1999 and 1998, lease
obligations in the amount of $2.6 million and $3.9 million, respectively, were
incurred in connection with the purchase of, or option to purchase, revenue
equipment and the associated tires in service.
During the three months ended September 30, 1999 and 1998, the Company
made interest payments of $1.9 million and $1.5 million, respectively.
(9) Earnings Per Share
The following table sets forth the computation of basic and diluted
earnings per share:
For the three months ended
September 30,
1999 1998
---- ----
Numerator for basic and
diluted earnings (loss) per share, net income $ (589,000) $ 1,532,000
=========== ===========
Denominator:
Denominator for basic earnings
per share-weighted-average shares ............ 7,771,956 7,726,663
Effect of dilutive securities:
Employee stock options ......................... 3,827 120,125
Warrants ....................................... -- 4,398
----------- -----------
Dilutive potential common shares ............... 3,827 124,523
----------- -----------
Denominator for diluted earnings
per share-adjusted weighted-
average shares and assumed
conversions ............................... 7,775,783 7,851,186
Basic earnings (loss) per share ................ $ (0.08) $ 0.20
=========== ===========
Diluted earnings (loss) per share .............. $ (0.08) $ 0.20
=========== ===========
10
Item 2. MANAGEMENT'S DISCUSSIONS AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Forward-Looking Statements
This Report on Form 10-Q contains forward looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995. Such
comments are based upon information currently available to management and
management's perception thereof as of the date of this report being filed.
Actual results of the Company=s operations could materially differ from those
forward looking statements. Such differences could be caused by a number of
factors including, but not limited to, potential adverse affects of regulation
and litigation; changes in competition and the effects of such changes;
increased competition; change in fuel prices; changes in economic, political or
regulatory environments; changes in the availability of a stable labor force;
ability of the Company to hire drivers meeting Company standards; changes in
management strategies; environmental or tax matters; viability to obtain and
implement year 2000 ("Y2K") hardware and software; 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.
Acquisition History
Effective July 1, 1999 the Company acquired the assets and assumed
certain liabilities of Zipp Express, Inc. for approximately $26 million. 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%. Zipp operates a relatively new fleet of about 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 will no longer be
required. The effect of upgrading the Company's fleet through this disposition
resulted in a non-cash charge of approximately $3.2 million in the three months
ended September 30, 1999.
Results of Operations
Three months ended September 30, 1999 compared with the three months ended
September 30, 1998
Revenue. Consolidated revenue increased by $10.6 million or 14.7%, to
$82.7 million for fiscal 2000 from $72.1 million for fiscal 1999. This increase
in revenue was due to the acquired operations of Zipp, as well as an increase in
rate per mile and billings to customers for the Mexican portion of their
transportation. The increase in rates reflected price increases and the
Company's continued efforts to focus on its core routes as well as an
improvement in the Company's overall business mix. The number of tractors
operated by the Company, including 856 owner-operated tractors, increased to
2,374 at September 30, 1999, compared to 2,186, including 556 owner-operated
tractors, at September 30, 1998.
11
Operating Income. Operating income increased by $0.1 million, or
2.3%, to $4.4 million in fiscal 2000 from $4.3 million in fiscal 1999. The
Company's operating ratio, which expresses operating expenses as a percentage of
operating revenue increased from 94.0% in fiscal 1999 to 94.7% in fiscal 2000.
Net Interest Expense. Net interest expense increased by $0.1 million
or 5.3%, to $2.0 million in fiscal 2000 from $1.9 million in fiscal 1999. The
increase was the result of borrowings under the Company's credit facilities
partially offset by reduced borrowings under capital leases.
Income Taxes. Income taxes decreased by $1.3 million, to a benefit of
$0.4 million in fiscal 2000 from an expense of $0.9 million in fiscal 1999. The
decrease in income tax expense reflects the Company's pre-tax loss. The
Company's effective tax rate was 37.5% in fiscal 2000 and 37.7% in fiscal 1999.
Liquidity and Capital Resources
The Company's primary capital requirements in fiscal 2000 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,
1999, the Company had an aggregate of $64.4 million in capital lease financing
at interest rates ranging from 5.3% to 10.0%, maturing at various dates through
2004. Of this amount, $13.3 million is due prior to September 30, 2000. 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, 1999, the Company had on order revenue equipment
representing an aggregate capital commitment of $13.2 million. 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.
In August 1999, the Company completed a new $60 million banking
facility with ING Barings. The new arrangement includes a $30 million revolving
loan and a $30 million term loan. The new banking arrangement was obtained to
finance the $26 million asset purchase of Zipp Express, Inc. At September 30,
1999, $52.7 million was utilized as outstanding borrowings and $1.8 million was
utilized for standby letters of credit.
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.
12
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 2000 and 1999 generally were not significant.
Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued
Statement No. 133, Accounting for Derivative Instruments and Hedging Activities,
which is required to be adopted in years beginning after June 15, 2000. 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.
Impact of the Year 2000
An issue exists for all companies that rely on computers as the year
2000 approaches. The "Year 2000" problem is the result of the past practice in
the computer industry of using two digits rather than four to identify the
applicable year. This practice may result in incorrect results when computers
perform arithmetic operations, comparisons or data field sorting involving years
later than 1999. In an effort to assess its state of readiness for the
technological challenges posed by the Year 2000 problem the Company has
performed a complete inventory assessment of both its information technology
("IT") and non-IT systems. In assessing its level of readiness the Company
considered the following to be the most important factors: (i) the level of
compliance of the Company's central computer systems; (ii) the level of
compliance of the software used in the Company's ongoing operations; (iii) the
level of readiness of the Company's largest vendors; (iv) the level of readiness
of the Company's largest customers; and (v) the level of compliance of the
Company's non-IT systems. The Company's non-IT systems are Year 2000 compliant
in all material respects.
The Company's central computer systems are Year 2000 compliant, with
the exception of minimal numbers of desktop personal computers ("PC's"). These
PC's are scheduled for replacement with newer models by the Company as part of
its ongoing technology maintenance. The Company relies on prepackaged,
non-modified software systems for approximately 95% of its software needs. These
software systems have been upgraded and have been recognized as being Year 2000
compliant by the respective vendor.
The Company has taken steps to encourage its suppliers and customers to
become Year 2000 compliant in a timely manner, but there can be no assurances
that such suppliers and customers will be Year 2000 compliant. The Company has
received certifications from most of its suppliers indicating that they have
taken, or will on a timely basis take, such measures as are necessary to become
Year 2000 compliant. Failure of the Company's suppliers to become Year 2000
compliant on a timely basis may cause the Company to utilize more labor
intensive means to place orders and make payments.
13
The Company's largest customer, DaimlerChrysler, is currently doing
business with the Company using Year 2000 compliant technology. The Company does
not know the extent to which all of its customers have completed or initiated
Year 2000 remediation programs. In the event that the Company's customers do not
install Year 2000 compliant systems, the Company may need additional clerical
staff to perform certain tasks, such as order entry and cash posting, and to
provide the information currently provided to customers electronically.
The Company has and is continuing to develop contingency plans to
address the process necessary to maintain critical business functions should a
significant third party system or critical internal system fail. These
contingency plans generally include the repair of existing systems and, in some
instances, the use of alternative systems or procedures. The Company is
developing business continuity plans specific to Year 2000 issues that are based
on these existing plans. The Company has contingency plans in place as of
September 30, 1999.
The costs of the Company's Year 2000 efforts are based upon
management's best estimates, which are derived using numerous assumptions
regarding future events, including the continued availability of certain
resources, third-party remediation plans and other factors. There can be no
assurance that these estimates will prove to be accurate, and actual results
could differ materially from those currently anticipated. The Company currently
estimates it will spend approximately $150,000 over the life of the program and
that approximately 95 percent of the anticipated costs were incurred by the end
September 30, 1999. Expenses associated with addressing the Year 2000 issues are
being recognized as incurred. The failure to correct a material Year 2000
problem could result in an interruption in, or a failure of, certain normal
business activities or operations. Such failures could materially and adversely
affect the Company's results of operations.
Due to the uncertainty inherent in the Year 2000 problem, the Company
is unable to determine, at this time, whether the consequences of Year 2000
failures will have a material impact on the Company's results of operations. The
Company's Year 2000 projects are expected to significantly reduce the Company's
level of uncertainty about the Year 2000 problem and, in particular, about the
Year 2000 compliance and readiness of its vendors, service suppliers and
customers. The Company believes that, with the completion of the project as
scheduled, the possibility of a material interruption of normal operations
should be reduced.
14
Part II - Other Information
Item 5. Other
On October 29, 1999, the Company solicited proxies for its annual
meeting of stockholders to be held at the Company's Corporate Headquarters
located at One Celadon Drive, Indianapolis, Indiana 46235 on Friday, November 22
at 10:00 am (local time) for stockholders of record as of October 8, 1999.
Item 6. Exhibits and Reports on Form 8K
(a) Exhibits
Exhibit 10.61 - $60,000,000 Credit Agreement dated
August 11, 1999 between Celadon Group, Inc.,
and Celadon Trucking
Services, Inc., and ING (U.S.) Capital LLC.
Exhibit 27 - Financial Data Schedule
(b) Form 8-K Report on Form 8-K dated August 10, 1999 with
respect to the Acquisition of Zip Express,
Inc., dated July 1, 1999.
15
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 15, 1999
16