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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE PERIOD ENDED DECEMBER 31, 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 February 14, 2001 was 7,543,642.
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CELADON GROUP, INC.
INDEX TO
DECEMBER 31, 2000 FORM 10-Q
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of December 31, 2000 (unaudited)
and June 30, 2000.................................................................................3
Condensed Consolidated Statements of Operations (unaudited) - For the three
and six month periods ended December 31, 2000 and 1999............................................4
Condensed Consolidated Statements of Cash Flows (unaudited) - For the six
month periods ended December 31, 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........................................................................10
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders..............................................15
Item 6. Exhibits and Reports on Form 8-K.................................................................15
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PART I - FINANCIAL INFORMATION
CELADON GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
DECEMBER 31, JUNE 30,
2000 2000
------------ ----------
(UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents ...................................................... $ 345 $ 360
Trade receivables, net of allowance ............................................ 51,264 53,521
Accounts receivable - other .................................................... 7,979 8,013
Prepaid expenses and other current assets ...................................... 9,585 8,280
Tires in service ............................................................... 4,617 4,747
Income tax recoverable ......................................................... 1,407 1,639
Deferred income tax ............................................................ 802 802
--------- ---------
Total current assets .................................................... 75,999 77,362
Property and equipment, at cost ..................................................... 144,050 150,119
Less accumulated depreciation and amortization ...................................... 37,069 37,477
--------- ---------
Net property and equipment .............................................. 106,981 112,642
Tires in service .................................................................... 2,515 2,569
Goodwill, net of accumulated amortization ........................................... 20,460 20,435
Other assets ........................................................................ 2,085 2,314
--------- ---------
Total assets ................................................................... $ 208,040 $ 215,322
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ............................................................... $ 6,634 $ 5,669
Accrued expenses ............................................................... 23,333 26,819
Bank borrowings and current maturities of long-term debt ....................... 7,228 7,055
Current maturities of capital lease obligations ................................ 15,001 15,732
--------- ---------
Total current liabilities ............................................... 52,196 55,275
Long-term debt, net of current maturities ........................................... 45,715 49,751
Capital lease obligations, net of current maturities ................................ 44,713 42,908
Deferred income tax ................................................................. 8,862 8,862
Minority interest ................................................................... 12 119
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 December 31, 2000
and June 30, 2000, respectively .............................................. 257 257
Additional paid-in capital ..................................................... 60,260 60,113
Retained earnings .............................................................. (1,747) (722)
Accumulated other comprehensive loss ........................................... (1,256) (1,206)
Treasury stock, at cost, 246,122 and 3,523 shares at December 31, 2000
and June 30, 2000, respectively .............................................. (972) (35)
--------- ---------
Total stockholders' equity ..................................................... 56,542 58,407
--------- ---------
Total liabilities and stockholders' equity ............................... $ 208,040 $ 215,322
========= =========
See accompanying notes to condensed consolidated financial statements.
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CELADON GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
FOR THE THREE MONTHS ENDED FOR THE SIX MONTHS ENDED
DECEMBER 31, DECEMBER 31,
-------------------------- ------------------------
2000 1999 2000 1999
--------- ------------- ---------- -----------
Operating revenue ............................. $ 87,048 $ 86,612 $ 175,475 $ 169,277
--------- --------- --------- ---------
Operating expenses:
Salaries, wages and employee benefits .... 23,164 23,401 46,779 46,716
Fuel ..................................... 10,382 8,696 20,392 16,626
Operating costs and supplies ............. 5,953 6,544 12,942 12,597
Insurance and claims ..................... 2,220 2,104 4,403 4,359
Depreciation and amortization ............ 3,778 3,444 7,539 6,687
Rent and purchased transportation ........ 33,711 32,983 67,893 62,674
Professional and consulting fees ......... 508 388 1,041 790
Costs of goods sold ...................... 661 -- 1,256 --
Communications and utilities ............. 975 1,132 1,982 2,287
Permits, licenses and taxes ............. 1,564 1,401 3,126 2,910
General, administrative and selling ...... 2,838 2,621 5,079 5,318
--------- --------- --------- ---------
Total operating expenses ............. 85,754 82,714 172,432 160,964
--------- --------- --------- ---------
Operating income .............................. 1,294 3,898 3,043 8,313
Other (income) expense:
Interest income .......................... (39) (29) (75) (57)
Interest expense ......................... 2,638 2,194 4,997 4,224
Other expense, net ....................... (135) 61 (102) 150
Minority interest in subsidiary loss ..... (332) -- (344) --
Loss on disposition of equipment ......... -- -- -- 3,266
--------- --------- --------- ---------
Income (loss) before income taxes ............. (838) 1,672 (1,433) 730
Provision (benefit) for income taxes .......... (283) 619 (408) 265
--------- --------- --------- ---------
Net Income (loss) .................... $ (555) $ 1,053 $ (1,025) $ 465
========= ========= ========= =========
Earnings (loss) per Common Share:
Diluted Earnings Per Share ............... $ (0.07) $ 0.14 $ (0.13) $ 0.06
Basic Earnings Per Share ................. $ (0.07) $ 0.14 $ (0.13) $ 0.06
Average Shares Outstanding:
Diluted .................................. 7,730 7,792 7,757 7,784
Basic .................................... 7,730 7,777 7,757 7,774
See accompanying notes to condensed consolidated financial statements.
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CELADON GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
FOR THE SIX MONTHS ENDED
DECEMBER 31,
------------------------
2000 1999
--------- -----------
Cash flows from operating activities:
Net income (loss) ................................................... $ (1,025) $ 465
Adjustments to reconcile net income (loss) to net cash provided
by operating activities:
Depreciation and amortization ..................................... 7,539 6,778
Loss on disposition of equipment .................................. -- 3,266
Non-cash member and vendor development costs ...................... 342 --
Minority interest ................................................. (332) --
Provision for deferred income taxes ............................... -- (1,202)
Provision for doubtful accounts ................................... 408 279
Changes in assets and liabilities:
Trade receivables .............................................. 1,049 (7,180)
Accounts receivable -- other ................................... 34 (510)
Income tax recoverable ......................................... 232 67
Tires in service ............................................... 184 (654)
Prepaid expenses and other current assets ...................... (1,305) (650)
Other assets ................................................... 186 139
Accounts payable and accrued expenses .......................... (2,521) (2,140)
Income taxes payable ........................................... -- 1,582
-------- --------
Net cash provided by operating activities ...................... 4,791 240
-------- --------
Cash flows from investing activities:
Purchase of property and equipment ................................ (5,546) (5,756)
Proceeds on sale of property and equipment ........................ 12,730 8,798
Purchase of business, net of cash ................................. -- (24,921)
-------- --------
Net cash provided by (used for) investing activities ........... 7,184 (21,879)
-------- --------
Cash flows from financing activities:
Proceeds from issuances of common stock in subsidiary ............. 50 200
Purchase of common stock held in treasury ......................... (957) --
Proceeds from bank borrowings and debt ............................ 4,698 35,430
Payments of bank borrowings and debt .............................. (3,316) (8,158)
Principal payments under capital lease obligations ................ (12,465) (6,222)
-------- --------
Net cash provided by (used for) financing activities ........... (11,990) 21,250
-------- --------
Decrease in cash and cash equivalents ............................... (15) (389)
Cash and cash equivalents at beginning of year ...................... 360 695
-------- --------
Cash and cash equivalents at end of period .......................... $ 345 $ 306
======== ========
See accompanying notes to condensed consolidated financial statements.
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CELADON GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 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 its 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 fiscal
year 2000 comparison.
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CELADON GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 2000
(UNAUDITED)
FOR THE THREE MONTHS ENDED FOR THE SIX MONTHS ENDED
DECEMBER 31, 2000 DECEMBER 31, 2000
------------------------------------------- -------------------------------------------
(DOLLARS IN THOUSANDS) (DOLLARS IN THOUSANDS)
TRANSPORTATION E-COMMERCE TOTAL TRANSPORTATION E-COMMERCE TOTAL
-------------- ---------- --------- -------------- ---------- --------
Revenue from external customers .... $ 85,816 $ 1,232 $ 87,048 $ 173,334 $ 2,141 $ 175,475
Operating income (loss) ............ 1,949 (655) 1,294 4,384 (1,341) 3,043
Interest revenue ................... 39 -- 39 75 -- 75
Interest expense ................... 2,578 60 2,638 4,906 91 4,997
Other income ....................... (135) (332) (467) (102) (344) (446)
Loss before income taxes ........... $ (455) $ (383) $ (838) $ (345) $ (1,088) $ (1,433)
Information as to the Company's operations by geographic area is
summarized below:
FOR THE THREE MONTHS ENDED FOR THE SIX MONTHS ENDED
DECEMBER 31, 2000 DECEMBER 31, 2000
--------------------------- -------------------------
(DOLLARS IN THOUSANDS) (DOLLARS IN THOUSANDS)
2000 1999 2000 1999
---------- --------- --------- --------
Operating revenue:
United States............... $69,129 $69,651 $139,484 $135,887
Canada...................... 12,902 12,937 26,347 26,379
Mexico...................... 5,017 4,024 9,644 7,011
------- ------- -------- --------
Total .................. $87,048 $86,612 $175,475 $169,277
======= ======= ======== ========
The Company's largest customer is DaimlerChrysler, which accounted for
approximately 20% and 24% of the Company's total truckload revenue for the three
months ended December 31, 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 has two agreements with
DaimlerChrysler: (a) an agreement with the Chrysler division which expires in
October 2003, and (b) an international contract with the Freightliner division,
which expires in April 2001. The Chrysler division agreement accounted for
approximately 19% and 21% of the Company's total truckload revenue for the three
months ended December 31, 2000 and 1999, respectively. The Freightliner division
contract accounted for approximately 1% and 3% of the Company's total truckload
revenue for the three months ended December 31, 2000 and 1999, respectively. No
other customer accounted for more than 5% of the Company's total revenue during
any of its two most recent fiscal years.
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CELADON GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 2000
(UNAUDITED)
(3) INCOME TAXES
The effective tax rates, pertaining to the tax expense (benefits), for
operations for the six months ended December 31, 2000 and 1999 were 28% and 36%,
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 $(0.8) million and $0.9 million for
the three months ended December 31, 2000 and 1999, respectively. Total
comprehensive income (loss) was $(1.1) million and $0.4 million for the six
months ended December 31, 2000 and 1999, respectively. The difference between
the total comprehensive income (loss) and net income (loss) relates to the
effect of foreign currency translation adjustments.
(5) CONTINGENCIES AND HEDGING ACTIVITIES
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 or results of operations when settled.
The Company is a defendant in a lawsuit filed by Reliance National
Indemnity Company ("Reliance") relating to two trucker's 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 or results of
operations when settled.
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 adjustment in the statement of operations or other
comprehensive income, as the Company had no derivatives outstanding on that
date. Since October 1, 2000, the Company has entered into various derivative
contracts to hedge fuel costs through June 2001. These contracts have been
recorded at fair value on the balance sheet with the offset being recognized in
the statement of operations. In connection with these activities, the Company
recognized earnings of approximately $200 thousand for the quarter ended
December 31, 2000.
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CELADON GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 2000
(UNAUDITED)
(6) 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 FOR THE SIX MONTHS ENDED
DECEMBER 31 DECEMBER 31
-------------------------- --------------------------
2000 1999 2000 1999
----------- ----------- ----------- -----------
Income (loss) available to common shareholders .......... $ (555) $ 1,053 $ (1,025) $ 465
=========== =========== =========== ===========
Basic income (loss) per share:
Weighted - average number of common
shares outstanding ............................... 7,729,788 7,776,557 7,756,695 7,774,257
Basic income (loss) per share ...................... $ (0.07) $ 0.14 $ (0.13) $ 0.06
=========== =========== =========== ===========
Diluted income (loss) per share:
Weighted - average number of common
shares outstanding ............................... 7,729,788 7,776,557 7,756,695 7,774,257
Effect of stock options and other incremental
shares ........................................... -- 15,716 -- 9,771
----------- ----------- ----------- -----------
Weighted - average number of common shares
outstanding-diluted .............................. 7,729,788 7,792,273 7,756,695 7,784,028
=========== =========== =========== ===========
Diluted income (loss) per share ......................... $ (0.07) $ 0.14 $ (0.13) $ 0.06
=========== =========== =========== ===========
Diluted loss per share for the six months ended December 31, 2000 does not
include the anti-dilutive effect of 57 thousand stock options and other
incremental shares.
(7) MORTGAGE DEBT
In December 2000, the Company converted mortgage debt on 67 tractors to
operating leases. The Company reduced debt by $5.3 million and net revenue
equipment by $5.2 million in order to receive a more favorable interest rate on
the financing of nearly 2%. The income statement effect of this transaction was
not material.
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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.
RESULTS OF OPERATIONS
THREE MONTHS ENDED DECEMBER 31, 2000 COMPARED WITH THE THREE MONTHS ENDED
DECEMBER 31, 1999
Revenue. Consolidated revenue increased by $0.4 million, or 0.5%, to $87.0
million for fiscal 2001 from $86.6 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. These increases were offset by a
reduction in dispatch miles in December related to unplanned shutdowns of
automotive plants and severe ice storms in the Midwest and Southwest. The number
of tractors operated by the Company, including 959 owner-operated tractors,
increased to 2,705 at December 31, 2000, compared to 2,649, including 1,016
owner-operated tractors, at December 31, 1999.
Revenue includes $1.2 million in fiscal 2001 from TruckersB2B. The
TruckersB2B revenue for the December 2000 quarter represents over $29 million in
purchases made by its member companies through the TruckersB2B network.
TruckersB2B now has over 275,000 member trucks enrolled compared to 225,000 at
September 30, 2000. At December 31, 2000, these member trucks were represented
by more than 7,250 separate companies in the U.S. and Canada compared with more
than 6,000 at September 30, 2000.
Operating Income. Consolidated operating income decreased by $2.6 million,
or 66.6% to $1.3 million in fiscal 2001 from $3.9 million in fiscal 2000. The
decrease in operating income was a result of reduced truckload revenue,
increases in fuel costs, rent and purchased transportation, and TruckersB2B
operating expenses. The Company's operating ratio, which expresses operating
expenses as a percentage of operating revenue increased from 95.5% in fiscal
2000 to 97.7%, excluding TruckersB2B, in fiscal 2001.
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In the December 2000 quarter, TruckersB2B recorded a $655 thousand
operating loss primarily related to marketing costs and salaries. TruckersB2B
recorded $342 thousand of non-cash member and vendor development expense related
to issuing shares of TruckersB2B common stock at fair value to a strategic
partner. The non-cash member and vendor development costs were offset by an
increase in minority interest.
In the truckload segment, the most significant cost increase was fuel
expense. In the December 2000 quarter, fuel costs increases, net of customer
surcharges, resulted in additional expense of approximately $775 thousand
(pre-tax), or approximately $0.06 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 $1.2
million. 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 and Mexican purchased transportation. Expenses for logistics and Mexican
purchased transportation increased in relation to revenue for these types of
transportation businesses.
In addition, trailer costs have increased approximately $650 thousand
related to replacing 48 foot trailers with 53 foot trailers. The Company added
2,200 operating lease and short-term rental trailers in its fleet since the
December 1999 quarter. The Company has also sold or terminated short-term leases
on approximately 1,900 48-foot trailers since December 1999.
Net Interest Expense. Net interest expense increased by $0.4 million, or
18.2%, to $2.6 million in fiscal 2001 from $2.2 million in fiscal 2000. The
increase was primarily the result of an increase in interest rates under the
Company's credit facilities.
Income Taxes. Benefit for income taxes was $0.3 million in fiscal 2001 as
compared to an expense of $0.6 million in fiscal 2000. The Company's effective
tax rate was 34% in fiscal 2001 and 37% 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.
SIX MONTHS ENDED DECEMBER 31, 2000 COMPARED WITH THE SIX MONTHS ENDED
DECEMBER 31, 1999
Revenue. Consolidated revenue increased by $6.2 million, or 3.7%, to $175.5
million for fiscal 2001 from $169.3 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. These increases were offset by a
reduction in dispatch miles in December related to unplanned shutdowns of
automotive plants and severe ice storms in the Midwest and Southwest. The number
of tractors operated by the Company, including 959 owner-operated tractors,
increased to 2,705 at December 31, 2000, compared to 2,649, including 1,016
owner-operated tractors, at December 31, 1999.
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Revenue includes $2.1 million in fiscal 2001 from TruckersB2B. The
TruckersB2B revenue for the six months ended December 2000 represents over $53
million in purchases made by its member companies through the TruckersB2B
network. TruckersB2B now has over 275,000 member trucks enrolled compared to
158,000 at June 30, 2000. At December 31, 2000, these member trucks were
represented by more than 7,250 separate companies in the U.S. and Canada
compared with more than 3,600 at June 30, 2000.
Operating Income. Consolidated operating income decreased by $5.3 million,
or 63.9% to $3.0 million in fiscal 2001 from $8.3 million in fiscal 2000. The
decrease in operating income was a result of reduced truckload revenue,
increases in fuel costs, rent and purchased transportation, and TruckersB2B
operating expenses. The Company's operating ratio, which expresses operating
expenses as a percentage of operating revenue increased from 95.1% in fiscal
2000 to 97.5%, excluding TruckersB2B, in fiscal 2001.
In fiscal 2001, TruckersB2B recorded a $1.3 million operating loss
primarily related to marketing costs and salaries. TruckersB2B recorded $342
thousand of non-cash member and vendor development expense related to issuing
shares of TruckersB2B common stock at fair value to a strategic partner. The
non-cash member and vendor development costs were offset by an increase in
minority interest.
In the truckload segment, the most significant cost increase was fuel
expense. In fiscal 2001 quarter, fuel costs increases net of customer surcharges
resulted in additional expense of approximately $1.6 million (pre-tax) or
approximately $0.13 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 $1.9 million. 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 and Mexico purchased transportation. Expenses for logistics and Mexico
purchased transportation increased in relation to revenue for these types of
transportation businesses.
In addition, trailer costs have increased approximately $1.1 million
related to replacing 48 foot trailers with 53 foot trailers. The Company added
2,200 operating lease and short-term rental trailers in its fleet since the
December 1999 quarter. The Company has sold or terminated short-term leases on
approximately 1,900 48-foot capital lease or owned trailers since December 1999.
Net Interest Expense. Net interest expense increased by $0.7 million, or
16.6%, to $4.9 million in fiscal 2001 from $4.2 million in fiscal 2000. The
increase was primarily the result of an increase in borrowings and an increase
in interest rates under the Company's credit facilities.
Income Taxes. Benefit for income taxes was $0.4 million in fiscal 2001 as
compared to an expense of $0.3 million in fiscal 2000. The Company's effective
tax rate was 28% in fiscal 2001 and 36% 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.
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LIQUIDITY AND CAPITAL RESOURCES
The Company's primary capital requirements in fiscal 2001 will be for the
acquisition of revenue equipment and computer hardware and software. The Company
finances its capital requirements from cash provided by operating activities,
proceeds from the sale of revenue equipment, lease financing, and the Company's
credit agreement.
Net cash provided by operating activities increased to $4.8 million for
fiscal 2001 from $0.2 million in fiscal 2000. The increase is attributable to a
reduction in trade receivables and an increase in depreciation and amortization
offset by an increase in prepaid expenses.
Net cash provided by investing activities increased to $7.2 million for
fiscal 2001 compared to $21.9 million used for investing activities in fiscal
2000. The increase is primarily related to cash used to purchase Zipp Express in
fiscal 2000 and increased proceeds from the sale of revenue equipment in fiscal
2001.
As of December 31, 2000, the Company had on order revenue equipment
representing an aggregate capital commitment of approximately $2.7 million.
Management believes that there are presently adequate sources of secured
equipment financing together with its existing credit facilities and cash flows
from operations to support the Company's anticipated acquisitions.
Net cash used for financing activities amounted to $12.0 million in fiscal
2001 compared to $21.3 million provided by financing activities in fiscal 2000.
In fiscal 2000, the Company received additional proceeds from bank borrowings
for the purchase of Zipp Express, whereas, in fiscal 2001 bank borrowings were
in the normal course of business.
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. 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.
Standby letters of credit, not reflected in the accompanying consolidated
financial statements, aggregated approximately $1.3 million at December 31,
2000.
At December 31, 2000, the Company had an aggregate of $59.7 million in
capital lease financing at interest rates ranging from 5.3% to 8.0%, maturing at
various dates through 2005. Of this amount, $15.0 million is due prior to
December 31, 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.
In December 2000, the Company converted mortgage debt on 67 tractors to
operating leases. The Company reduced debt by $5.3 million and net revenue
equipment by $5.2 million in order to receive a more favorable interest rate on
the financing of nearly 2%. The income statement effect of this transaction was
not material.
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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.
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PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Celadon Group, Inc. held its regular Annual Meeting of shareholders on
November 28, 2000. Proxies representing 6,748,049 shares of Common Stock or 87%
of the total outstanding shares voted as follows:
Proposal I- Election of Directors Voted For Vote Withheld
--------- -------------
Stephen Russell 5,944,625 803,424
Paul A. Biddelman 6,174,319 573,730
Michael Miller 6,174,319 573,730
Anthony Heyworth 6,176,528 571,521
John Kines 6,178,520 569,529
Proposal II - Ratification of an amendment to the Celadon Group, Inc. 1994
Stock Option Plan
For 5,690,770
Against 1,048,119
Abstain 9,160
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 27 - Financial Data Schedule
(b) No Form 8-K was filed during the quarter ended December 31, 2000.
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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: February 14, 2001
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