Celadon Group announces fourth quarter and annual results.

INDIANAPOLIS, Ind.--(BUSINESS WIRE)--Sept. 9, 1996--Celadon Group Inc. (NASDAQ: CLDN) announced today financial results for the fourth quarter ended June 30, 1996 reflecting a net loss from continuing operations of $3.9 million ($0.50 per share) and a net loss from discontinued operations of $6.4 million ($0.82 per share).

This compares with a $0.1 million net loss from continuing operations in the June 1995 quarter and a net loss from discontinued operations of $2.2 million ($0.29 per share) in the same period.

For the fiscal year ended June 30, 1996, the net loss from continuing operations of $1.6 million ($0.20 per share) compares with net income of $1.9 million ($0.26 per share) in fiscal year 1995. Discontinued operations in fiscal 1996 reported a combined net loss of $15.2 million ($1.93 per share), primarily related to the loss from the disposition of freight forwarding business assets. This compares with a net loss from discontinued operations of $2.3 million ($0.31 per share) in fiscal 1995.

For the June 1996 quarter, revenue from continuing operations was $42.9 million compared to $30.8 million last year. Revenue for the fiscal year ended June 30, 1996 was $166.5 million as compared with $116.4 million for the same period a year ago.

The losses in the June 1996 quarter were due largely to several unusual events. Celadon Trucking, the truckload trucking subsidiary, converted from a ten-year old operating system that was built to run a 500 tractor fleet to QTOPS(R), a system that is integrated with all of Celadon's Qualcomm(R) equipped tractors and which is capable of handling a fleet substantially larger than the current fleet of 1,100 tractors. The disruption of the system conversion resulted in operating inefficiencies contributing an estimated $2.5 million to the loss. Also in the quarter, unfavorable results in litigated insurance cases as well as reassessment of reserves on outstanding cases plus accelerated equipment damage repairs and higher volume of normal claims adversely impacted earnings, adding $1.8 million to the loss. Additionally, the senior management changes required recognition of separation costs of approximately $800,000.

Discontinued operations in the fiscal 1996 fourth quarter relating to freight forwarding were negatively impacted by a reduction in the estimate of receipts from the Harper Group. The final purchase price for the customer list sold to Harper in February 1996 was equal to the net revenue for the 12 months following the sale of the operating locations. Prior year net revenue for the stations sold was $21 million. It was initially estimated that $14.5 million would be collected of which $9.5 million was paid at closing in February. It now appears that Harper is experiencing a substantial reduction in revenue and consequently the total estimated proceeds will be reduced by $5.0 million. Additionally, the realizable value of net assets to be liquidated has been reduced based upon actual collection and payment experience since February 1996. Also, the cost associated with the liquidation of the net assets retained has exceeded earlier estimates requiring an increase in the estimated loss from operations.

In the June 1996 fourth quarter, Celadon's discontinued operations losses also reflected the discontinuance of its logistics line of business which included a South American operation (Celsur), and Celadon Express. For the quarter the logistics segment reported a combined $600,000 net loss primarily related to the package express business and for the year the business reported essentially break-even net income.

Celadon's chairman, Stephen Russell, commented on the results. "Despite these losses, the Company is stronger and more focused today. Celadon is now a pure trucking company, with primary emphasis on the U.S.-Mexico market. We have sold the freight forwarding businesses as well as the distribution operations in South America and the package express business.

"Based on July and August results, we are confident we will be solidly profitable in the first quarter of fiscal 1997. Operating expenses have been reduced close to $100,000 per week compared to the May running rate, and we continue to make progress across the board. Our management team has been strengthened in key areas. Ron Roman joined Celadon as executive vice president - fleet management at the beginning of July, bringing us 25 years of substantive experience in our industry. Additionally, we have achieved significant improvement in driver retention and higher equipment utilization. We are pleased that we are making such dramatic progress and we expect our performance to continue to improve as we go forward."

Celadon Group Inc. is a truckload company specializing in the transport of goods to and from Mexico. Celadon Trucking has 1,132 operating line haul tractors and 3,963 trailers and the flatbed division, Cheetah Transportation, has a network of approximately 215 owner-operated tractors. -0-

                      Celadon Group Inc. (NASDAQ: CLDN)
                        Consolidated Operating Results
                               (Unaudited)
                  (Amounts in thousands, except per share amounts)

                   Three Months Ended          Twelve Months Ended
                    6/30/96    6/30/95        6/30/96      6/30/95
Revenue:
 Trucking-Truckload  $38.0      $30.8          $148.1       $116.4
         -Flatbed      4.9        --             18.4          --
Total Revenue        $42.9      $30.8          $166.5       $116.4
Operating income
 (loss)
 Trucking
  - Truckload        $(3.7)     $ 2.9          $  5.2       $ 12.7
  - Flatbed            0.2         --             0.7          --
Corporate expense    $(1.8)     $(1.2)         $ (4.2)      $ (3.5)
 Operating income
  (loss) from
  continuing
  operations          (5.3)       1.7             1.7          9.2
Interest expense      (0.9)      (0.7)            3.7         (3.2)
Other income(loss)      --       (0.1)             --         (0.1)
Profit(loss) before a
 tax from continuing
 operations           (6.2)       0.9            (2.0)         5.9
Provisions for income
 taxes                 2.3       (1.0)            0.4         (4.0)
Net income(loss) from
 continuing operations(3.9)      (0.1)           (1.6)         1.9
Discontinued operations:
 Loss from operations of
 freight forwarding
 (net of tax)         (1.2)      (2.2)           (2.3)        (2.8)
 Loss on disposal of
 freight forwarding
 (net of tax)         (4.6)        --           (12.8)          --
 Income(loss) from
 operations of
 logistics
 (net of tax)         (0.7)        --            (0.2)         0.5
 Gain on disposal of
 logistics (net
 of tax)               0.1         --             0.1           --
 Loss from discontinued
 operations (net of
 tax)                 (6.4)      (2.2)          (15.2)        (2.3)

Net income (loss)    (10.3)      (2.3)          (16.8)        (0.4)
Earnings(loss) per
 share: continuing
 operations          (0.50)        --           (0.20)        0.26
 Discontinued
  operations:        (0.82)     (0.29)          (1.93)       (0.31)
Net income (loss)
 per share           (1.32)     (0.29)          (2.13)       (0.05)
Primary shares
 outstanding          7,751       7,941          7,879        7,191

CONTACT: The Celadon Group

Stephen Russell/Don Snyder

317/972-7034/ 317/972-7033

or

KCSA Investor & Investor Relations

Joseph A. Mansi/ Adam I. Friedman

212/682-6300, ext. 205/215