Celadon Group Reports Record June Quarter and Full Fiscal Year Results

Celadon Group Inc. (NASDAQ:CLDN) today reported its financial and operating results for the three months and fiscal year ended June 30, 2006.

Revenue for the quarter increased approximately 8.3% to $126.7 million in the 2006 quarter from $117.0 million in the 2005 quarter. Freight revenue, excluding fuel surcharges, was up 2.3% to $107.4 million in the 2006 quarter from $105.0 million in the 2005 quarter. Net income increased approximately 49% to $6.4 million in the 2006 quarter from $4.3 million for the same quarter last year. Diluted earnings per share improved over 42% to $0.27 in the 2006 quarter from $0.19 for the same quarter last year. The June quarter marked the best earnings per share in the history of the Company.

For the full year, revenue increased 9.9% to $480.2 million from $436.8 million for the prior year. Freight revenue, excluding fuel surcharges, was up 3.7% to $414.5 million for the 2006 fiscal year from $399.7 million in the 2005 fiscal year. Net income for the 2006 fiscal year was $20.5 million, or $0.88 per diluted share, compared with $12.6 million, or $0.55 per diluted share, for the prior year, or an increase of 60%.

During the quarter, the company completed a 3-for-2 stock split effected in the form of a 50% stock dividend paid on June 15, 2006. This raised the outstanding shares to approximately 23.1 million. The company previously completed a 3-for 2 stock split effected in the form of a 50% stock dividend paid on February 15, 2006.

Chairman and CEO Steve Russell commented on the quarter: "The June quarter reflected accelerating success of the programs we initiated over four years ago to execute our strategic plan. Continued strengthening of our customer base, enhanced driver satisfaction, steadily increasing average rates per mile, improved equipment age, and further strengthening of cost controls resulted in obtaining our interim goal of an operating ratio (defined as operating expenses, excluding fuel surcharge, as a percentage of freight revenue) of 90%. Operating ratio improved to 90.3% in the June 2006 quarter, from 92.9% in the prior year's June quarter. Net income increased by 49% to $6.4 million from $4.3 million, and pre-tax earnings as a percent of freight revenue increased to 9.5% from 6.8% in the June 2005 quarter.

"Our performance has improved significantly over the past four years and we believe our future results will be assisted by a favorable relationship between freight demand and truckload capacity. Even though we believe the capacity growth in our industry continues to be constrained by a shortage of qualified drivers, we are pleased that our continued commitment to the quality of life of our drivers has allowed us to increase our average seated line-haul tractors by about 100 over the past four months. Miles per truck per week were similar in both the June 2006 and June 2005 quarters.

"During the quarter, we continued to strengthen our balance sheet through improving cash flow. The improved cash flow from operations has allowed us to pay cash for equipment since the June 2005 quarter, while earnings have resulted in over $120 million in stockholders' equity at June 30, 2006, from less than $100 million at June 30, 2005.

"In summary, we are pleased with our performance in the June 2006 quarter, and, we believe we will be able to continue to execute on our strategic plan and produce positive results going forward."

Celadon has been included in the Russell 3000 Index and NASDAQ Global Select Market, effective July 1, 2006.

Conference Call Information

An investor conference call is scheduled for Friday, July 28, at 10:30 a.m. ET. Steve Russell and other members of management will discuss the results of the quarter and the year. To listen and participate in the question-and-answer exchange, dial 866-700-6979 (international calls 617-213-8836) pin number 39513593 a few minutes prior to the starting time. A replay will be available through September 28, 2006 by dialing 888-286-8010 (international calls 617-801-6888) and entering call back code 26088885.

This call is being webcast by Thomson/CCBN and can be accessed at www.celadongroup.com.

Founded in 1985, Celadon Group Inc. (www.celadongroup.com) is a truckload carrier headquartered in Indianapolis that operates in the U.S., Canada and Mexico. Celadon also owns TruckersB2B Inc. (www.truckersb2b.com) which provides cost savings to about 20,000 member fleets.

This press release and statements made by Celadon in its stockholder reports and public filings, as well as oral public statements by Celadon representatives, contain certain forward-looking information, usually identified by words such as "anticipates," "believes," "estimates," "projects," "intends," "expects," "plans," or similar expressions. These statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements are based upon the current beliefs and expectations of Celadon's management and are subject to significant risks and uncertainties. Actual results may differ from those set forth in forward-looking statements. In this press release, these statements include, without limitation, statements relating to anticipated capacity constraints and freight demand in the industry, driver turnover, execution of our strategic plan, and our expected future results. The following factors, among others, could cause actual results to differ materially from those in forward-looking statements: the risk that our perception of industry fundamentals is incorrect; 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; our ability to execute our strategic plan; 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 commitments, 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; increases in interest rates or decreased availability of capital or other sources of financing for revenue equipment; decreases in the resale value of our used 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; 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 the various disclosures made by Celadon in this press release, stockholder reports, and in its Forms 10-K, 10-Q, and other public filings. Celadon disclaims any such obligation to update or alter its forward-looking statements whether as a result of new information, future events, or otherwise.

For a more detailed discussion of these factors, please refer to the various disclosures made by the Company in its press releases, stockholder reports, and filings with the Securities and Exchange Commission.

                      Consolidated Balance Sheets
               (Dollars in thousands, except par value)
                                                  June 30,   June 30,
                                                    2006       2005
                                                 ----------- ---------
   ASSETS                                        (unaudited)

Current assets:
  Cash and cash equivalents                          $1,674   $11,115
  Trade receivables, net of allowance for
   doubtful accounts of $1,269 and $1,496 in 2006
   and 2005, respectively                            55,462    55,760
  Prepaid expenses and other current assets          10,132     7,391
  Tires in service                                    2,737     3,308
  Income tax receivable                               5,216       ---
  Deferred income taxes                               1,867     2,424
                                                 ----------- ---------
     Total current assets                            77,088    79,998
Property and equipment, at cost                     121,733    88,230
  Less accumulated depreciation and amortization     30,466    30,685
                                                 ----------- ---------
     Net property and equipment                      91,267    57,545
Tires in service                                      1,569     1,739
Goodwill                                             19,137    19,137
Other assets                                          1,005     2,089
                                                 ----------- ---------
     Total assets                                  $190,066  $160,508
                                                 =========== =========


Current liabilities:
  Accounts payable                                   $4,369    $4,465
  Accrued salaries and benefits                      16,808    11,928
  Accrued insurance and claims                        7,048    10,021
  Accrued fuel expense                                6,481     6,599
  Other accrued expenses                             12,018    11,270
  Current maturities of long-term debt                  975     1,057
  Current maturities of capital lease obligations       507       788
  Income tax payable                                    ---     1,958
                                                 ----------- ---------
     Total current liabilities                       48,206    48,086
Long-term debt, net of current maturities             9,608     4,239
Capital lease obligations, net of current
 maturities                                             933     1,260
Deferred income taxes                                 9,867     8,407
Minority interest                                        25        25
Stockholders' equity:
  Preferred stock, $1.00 par value, authorized
   179,985 shares; no shares issued and
   outstanding                                          ---       ---
  Common stock, $0.033 par value, authorized
   40,000,000 shares; issued and outstanding
   23,111,367 and 21,935,183 shares at June 30,
   2006 and June 30, 2005                               763       332
  Additional paid-in capital                         90,828    89,359
  Retained earnings                                  32,092    11,544
  Unearned compensation on restricted stock             ---      (711)
  Accumulated other comprehensive loss               (2,256)   (2,033)
                                                 ----------- ---------
     Total stockholders' equity                     121,427    98,491
                                                 ----------- ---------
     Total liabilities and stockholders' equity    $190,066  $160,508
                                                 =========== =========

                       Key Operating Statistics

                                        For the three   For the fiscal
                                         months ended     year ended
                                           June 30,        June 30,
                                         2006    2005    2006    2005
                                       ------- ------- ------- -------
                                            Operating Statistics

Average revenue per loaded mile(a)     $1.506  $1.469  $1.491  $1.424
Average revenue per total mile (a)     $1.368  $1.346  $1.367  $1.316
Avg. revenue per tractor per week (a)  $2,975  $2,934  $2,948  $2,841
Average miles per tractor per week      2,174   2,179   2,157   2,158
Average line-haul tractors              2,366   2,380   2,297   2,322
Tractors at end of period (b)           2,732   2,570   2,732   2,570
Trailers at end of period (b)           7,630   7,468   7,630   7,468

(a)Excluding fuel surcharges
(b)Total fleet, including equipment operated by independent
    contractors and our Mexican subsidiary, Jaguar.

               (in thousands, except per share amounts)

                                  For the three      For the fiscal
                                  months ended         year ended
                                    June 30,            June 30,
                                 2006      2005      2006      2005
                               --------- --------- --------- ---------

Freight revenue                $107,393  $104,976  $414,465  $399,656
Fuel surcharge revenue          $19,279   $11,991   $65,729   $37,107
                               --------- --------- --------- ---------
   Total revenue               $126,672  $116,967  $480,194  $436,763

Operating expenses:
       Salaries, wages and
        employee benefits        38,606    34,981   144,634   133,565
       Fuel                      29,817    23,674   109,253    81,517
       Operations and
        maintenance               7,599     7,656    29,411    33,742
       Insurance and claims       2,730     4,448    13,697    14,375
       Depreciation and
        amortization              3,158     3,929    12,442    14,870
       Revenue equipment
        rentals                   9,257    10,296    39,601    35,848
       Purchased transportation  18,370    17,650    70,305    73,012
       Costs of products and
        services sold             1,444     1,299     5,433     4,807
       Professional and
        consulting fees             500       815     2,698     2,624
       Communications and
        utilities                 1,098     1,048     4,148     4,218
       Operating taxes and
        licenses                  2,143     2,117     8,247     8,507
       General and other
        operating                 1,559     1,559     6,097     6,270
                               --------- --------- --------- ---------
          Total operating
           expenses             116,281   109,472   445,966   413,355

Operating income                 10,391     7,495    34,228    23,408

Other (income) expense:
       Interest income              (34)       (4)     (153)      (12)
       Interest expense             206       330       933     1,430
       Other                          6         3        34        13
                               --------- --------- --------- ---------
Income before income taxes       10,213     7,166    33,414    21,977
   Income tax expense             3,825     2,853    12,866     9,397
                               --------- --------- --------- ---------
Net income                       $6,388    $4,313   $20,548   $12,580
                               ========= ========= ========= =========

Earnings per common share:
       Diluted earnings per
        share                   $0.27(1)  $0.19(1)  $0.88(2)  $0.55(2)
       Basic earnings per share $0.28(1)  $0.19(1)  $0.90(2)  $0.56(2)

Weighted average number of
 common shares outstanding:
       Diluted                 23,545(1) 23,130(1) 23,386(2) 23,013(2)
       Basic                   23,063(1) 22,570(1) 22,828(2) 22,286(2)

(1)Earnings per share amounts and average number of shares
    outstanding have been adjusted to give retroactive effect to a
    three-for-two stock split effected in the form of a 50% stock 
    dividend paid on June 15, 2006.
(2)Earnings per share amounts and average number of shares
    outstanding have been adjusted to give retroactive effect to two
    three-for-two stock splits effected in the form of a 50% stock
    dividend paid on February 15, 2006 and June 15, 2006.

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