Celadon Group's fiscal Q3 earnings fell 20.5% to US$3.5M as severe weather affected results; revenue grew 29.1% to US$193.2M

INDIANAPOLIS , April 30, 2014 (press release) – Celadon Group Inc. (CGI) today reported its financial and operating results for the three months ended March 31, 2014, the third fiscal quarter of the Company's fiscal year ending June 30, 2014. Revenue for the quarter increased 29.1% to $193.2 million in the March 2014 quarter from $149.6 million in the March 2013 quarter.  Freight revenue, which excludes fuel surcharges, increased 31.0% to $155.6 million in the March 2014 quarter from $118.7 million in the March 2013 quarter.  Net income decreased 20.5% to $3.5 million in the 2014 quarter from $4.4 million for the same quarter last year.  Earnings per diluted share decreased to $0.15 in the March 2014 period from $0.19 for the same quarter last year.

For the nine months ended March 31, 2014, revenue increased 24.5% to $561.9 million in 2014 from $451.0 million for the same period last year.  Freight revenue, which excludes fuel surcharges, increased 27.2% to $454.8 million in 2014 from $357.6 million for the same period last year. Net income decreased 24.5% to $15.2 million in 2014 from $20.0 million for the same period last year.  Earnings per diluted share decreased to $0.64 in 2014 from $0.86 for the same period last year.

Paul Will, President and Chief Executive Officer, made the following comments:   "Severe weather conditions negatively impacted our results for the March 2014 quarter.  The winter storms encountered were widespread and significantly affected both fleet utilization and operating costs.  Operations, maintenance and fuel expenses increased primarily due to the weather and to older equipment associated with our most recent acquisitions, which will be somewhat alleviated in future periods when those assets are refreshed in a similar fashion to the remaining Celadon fleet.

"The average age of the Company's tractor fleet, which includes over 400 tractors from recent acquisitions, has increased to 2.2 years as of March 2014.   We have on order 800 trucks to replace the acquisition equipment and begin to refresh the remaining fleet, which we expect will improve fuel economy and help bring down our overall maintenance costs to more historical levels.  Gains on sales of assets were $2.3 million in the March 2014 quarter compared with $0.3 million in the March 2013 quarter.  This was primarily the result of the sale of the Company's independent contractor lease portfolio and associated assets, which represented approximately 600 tractors.

"Although we had operating challenges during the March 2014 quarter, we believe we have taken the right steps to position the Company for future growth. We increased our average seated tractor count by 816, or 31%, to 3,440 in the March 2014 quarter compared to 2,624 in the March 2013 quarter, a significant operating metric improvement that resulted in increased revenue for the quarter.  This increase was a result of expanding our recruiting efforts at terminal locations, having established a driving school as well as our previously announced acquisitions over the past year.

"Our primary focus over the past year has been to expand our service offerings to our customers and grow our capacity of seated tractors, which has resulted in freight revenue growth for the March 2014 quarter of approximately 31% over the March 2013 quarter.  This growth strategy should position Celadon to better serve our customers now and especially in the near future as we believe truck capacity will continue to tighten for the truckload industry.  The business generated from these acquisitions has been instrumental in our ability to add truck capacity and density in our current operating lanes.  Although we have incurred acquisition, transition and weather related costs in the March 2014 quarter that should abate and we believe these costs and future synergies related to the acquisitions should benefit Celadon in future quarters. 

"Our average revenue per tractor per week decreased $132, or 4.6%, to $2,752 in the March 2014 quarter, from $2,884 in the March 2013 quarter.  This was attributable to the decreased tractor utilization during the March 2014 quarter due to severe weather.  Our average revenue per loaded mile increased to $1.60 per mile in the March 2014 quarter from $1.56 in the March 2013 quarter.

"Our balance sheet remains solid and we retain significant liquidity to support the growth of our business. At March 31, 2014 we had $239.0 million of stockholders equity.  Our cash flow generated from operations will allow us to effectively continue to execute on our growth strategy."

On April 29, 2014, the Board of Directors approved a regular cash dividend to shareholders for the quarter ending June 30, 2014.  The quarterly cash dividend of two cents ($0.02) per share of common stock will be payable on July 18, 2014 to shareholders of record at the close of business on July 3, 2014.

Conference Call Information

An investor conference call is scheduled for Wednesday, April 30 at 11:00 a.m. ET.  Management will discuss the results of the quarter.  To pre-register for the call please follow the links on our website at http://investors.celadontrucking.com.  For those without internet access or unable to pre-register, please dial in by calling  1-866-652-5200 (or 412-317-6060) a few minutes prior to the start time.  A replay will be available through May 28 at http://investors.celadontrucking.com

Celadon Group Inc. (www.celadongroup.com), through its subsidiaries, primarily provides long-haul, full-truckload freight service across the United States, Canada and Mexico.  The company also owns Celadon Logistics Services, which provides freight brokerage; Celadon Dedicated Services, which provides supply chain management solutions, such as warehousing and dedicated fleet services.

This press release contains certain statements that may be considered forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended. Such statements may be identified by their use of terms or phrases such as "expects," "estimates," "projects," "believes," "anticipates," "plans," "intends," and similar terms and phrases. Forward-looking statements are based upon the current beliefs and expectations of our management and are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified, which could cause future events and actual results to differ materially from those set forth in, contemplated by, or underlying the forward-looking statements.  Actual results may differ from those set forth in the forward-looking statements.  The following factors, among others, could cause actual results to differ materially from those in forward-looking statements: the risk that our perception of additional capacity due to seating trucks and perceived benefits thereof are inaccurate; the risk that our perception of changes in our customer base and perceived benefits thereto are inaccurate; the risk that managing our tractor fleet age does not result in greater flexibility and lower operating expenses; excess tractor and trailer capacity in the trucking industry; decreased demand for our services or loss of one or more of our major customers; surplus inventories; recessionary economic cycles and downturns in customers' business cycles; strikes, work slow downs, or work stoppages at our facilities, or at customer, port, border crossing, or other shipping related facilities; increases in compensation for and difficulty in attracting and retaining qualified drivers and independent contractors; increases in insurance premiums and deductible amounts; elevated experience in the frequency or severity of claims relating to accident, cargo, workers' compensation, health, and other matters; fluctuations in claims expenses that result from high self-insured retention amounts and differences between estimates used in establishing and adjusting claims reserves and actual results over time; increases or rapid fluctuations in fuel prices, as well as fluctuations in hedging activities and surcharge collection, the volume and terms of diesel purchase commitment, interest rates, fuel taxes, tolls, and license and registration fees; fluctuations in foreign currency exchange rates; increases in the prices paid for new revenue equipment and changes in the resale value of our used equipment; increases in interest rates or decreased availability of capital or other sources of financing for revenue equipment; seasonal factors such as harsh weather conditions that increase operating costs; competition from trucking, rail, and intermodal competitors; regulatory requirements that increase costs or decrease efficiency, including revised hours-of-service requirements for drivers and new emissions control regulations; our ability to identify acceptable acquisition candidates, consummate acquisitions, and integrate acquired operations; the timing of, and any rules relating to, the opening of the border to Mexican drivers; challenges associated with doing business internationally; our ability to retain key employees; and the effects of actual or threatened military action or terrorist attacks or responses, including security measures that may impede shipping efficiency, especially at border crossings.

Readers should review and consider these factors along with the various disclosures by the company in its press releases, stockholder reports, and filings with the Securities Exchange Commission.  We disclaim any obligation to update or revise any forward-looking statements to reflect actual results or changes in the factors affecting the forward-looking information.

For more information:
Joe Weigel
Director of Marketing & Communications
(800) CELADON Ext. 7006
(317) 972-7006 Direct
jweigel@celadontrucking.com

 

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CELADON GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Dollars in thousands except per share amounts)

(Unaudited)

 
   

For the three months ended

 

For the nine months ended

   

March 31,

 

March 31,

   

2014

 

2013

 

2014

 

2013

                 

REVENUE:

               

        Freight revenue

 

$155,552

 

$118,736

 

$454,750

 

$357,647

        Fuel surcharge revenue

 

37,676

 

30,902

 

107,176

 

93,400

                Total revenue

 

193,228

 

149,638

 

561,926

 

451,047

                 

OPERATING EXPENSES:

               

        Salaries, wages, and employee benefits

 

52,948

 

40,334

 

153,506

 

122,373

        Fuel

 

46,782

 

35,808

 

127,304

 

109,682

        Purchased transportation

 

43,263

 

32,814

 

130,606

 

89,789

        Revenue equipment rentals

 

1,760

 

1,653

 

4,989

 

5,303

        Operations and maintenance

 

14,449

 

7,912

 

37,375

 

23,691

        Insurance and claims

 

5,617

 

3,495

 

14,352

 

10,984

        Depreciation and amortization

 

13,568

 

13,796

 

44,417

 

36,004

        Communications and utilities

 

1,837

 

1,382

 

4,676

 

4,023

        Operating taxes and licenses

 

3,414

 

2,660

 

9,539

 

7,758

        General and other operating

 

2,808

 

1,748

 

7,906

 

5,673

                Total operating expenses

 

186,446

 

141,602

 

534,670

 

415,280

                 

                Operating income

 

6,782

 

8,036

 

27,256

 

35,767

                 

Interest expense

 

1,357

 

1,080

 

3,844

 

3,743

Interest income

 

(4)

 

---

 

(8)

 

---

Other income, net

 

(300)

 

(400)

 

(701)

 

(679)

                Income before income taxes

 

5,729

 

7,356

 

24,121

 

32,703

Income tax expense

 

2,247

 

2,978

 

8,947

 

12,683

Net income

 

$3,482

 

$4,378

 

$15,174

 

$20,020

                 

Income per common share:

               

        Diluted 

 

$0.15

 

$0.19

 

$0.64

 

$0.86

        Basic 

 

$0.15

 

$0.19

 

$0.66

 

$0.89

                 

        Diluted weighted average shares outstanding

 

23,803

 

23,522

 

23,715

 

23,318

        Basic weighted average shares outstanding

 

23,006

 

22,730

 

22,977

 

22,567

 

CELADON GROUP, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

March 31, 2014 and June 30, 2013

(Dollars and shares in thousands except par value)

 
 

(unaudited)

   
 

March 31,

 

June 30,

ASSETS

2014

 

2013

       

Current assets:

     

        Cash and cash equivalents

$4,635

 

$1,315

        Trade receivables, net of allowance for doubtful accounts of  $882 and

            $919 at March 31, 2014 and June 30, 2013, respectively

109,350

 

77,623

        Prepaid expenses and other current assets

25,336

 

13,434

        Tires in service

1,624

 

1,245

        Equipment for resale

4,097

 

9,923

        Income tax receivable

5,780

 

9,506

        Deferred income taxes

4,096

 

4,342

Total current assets

154,918

 

117,388

Property and equipment

640,679

 

612,236

Less accumulated depreciation and amortization

138,158

 

115,366

Net property and equipment

502,521

 

496,870

Tires in service

2,300

 

1,785

Goodwill

23,679

 

17,730

Investment in joint venture

4,184

 

4,604

Other assets

4,045

 

2,785

Total assets

$691,647

 

$641,162

       

LIABILITIES AND STOCKHOLDERS' EQUITY

     
       

Current liabilities:

     

        Accounts payable

$8,560

 

$10,401

        Accrued salaries and benefits

10,839

 

11,197

        Accrued insurance and claims

11,653

 

10,092

        Accrued fuel expense

12,741

 

7,461

        Other accrued expenses

35,105

 

20,070

        Current maturities of capital  lease obligations

56,259

 

25,669

Total current liabilities

135,157

 

84,890

         Long-term debt

105,930

 

78,137

        Capital lease obligations, net of current maturities

140,480

 

190,625

        Deferred income taxes

71,176

 

61,821

Stockholders' equity:

     

        Common stock, $0.033 par value, authorized  40,000 shares; issued and

            outstanding  23,959 and 23,887 shares at March 31, 2014 and June

            30, 2013, respectively

791

 

788

        Treasury stock at cost; 500 and 696 shares at March 31, 2014 and June

            30, 2013, respectively

(3,453)

 

(4,811)

        Additional paid-in capital

105,583

 

103,749

        Retained earnings

145,023

 

131,224

        Accumulated other comprehensive loss

(9,040)

 

(5,261)

Total stockholders' equity

238,904

 

225,689

Total liabilities and stockholders' equity

$691,647

 

$641,162

 

             

Key Operating Statistics

 
 

For the three months ended

For the nine months ended

 

March 31,

March 31,

 

2014

2013

2014

2013

 

 

Average revenue per loaded mile (*)

 

 

$1.597

 

 

$1.558

 

 

$1.609

 

 

$1.564

Average revenue per total mile (*)

$1.402

$1.386

$1.413

$1.396

Average revenue per tractor per week (*)

$2,752

$2,884

$2,846

$2,866

Average miles per seated tractor per week(**)

1,963

2,080

2,014

2,054

Average seated line-haul tractors (**)

3,440

2,624

3,294

2,686

*Freight revenue excluding fuel surcharge.

       

**Total seated fleet, including equipment operated by independent contractors and our Mexican subsidiary, Jaguar.

         

Adjusted Trucking Revenue (^)

$160,634

$129,273

$472,405

$393,632

Asset Light Revenue

14,410

10,493

41,669

32,032

Intermodal Revenue

10,475

5,932

27,733

15,453

Other Revenue

7,708

3,940

20,119

9,929

Total Revenue

$193,228

$149,638

$561,926

$460.976

^Trucking Revenue for US, Canada, Mexico.  Includes Fuel Surcharge.

   
     

 

 

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