UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K

[ X ]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
       ACT OF 1934
                     For the fiscal year ended June 30, 2004
                                       OR
[   ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
       EXCHANGE ACT OF 1934
         For the transition period from _________________ to ______________

                         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
                  Indianapolis, IN                            46235
       (Address of principal executive offices)            (Zip Code)

       Registrant's telephone number, including area code: (317) 972-7000

        Securities registered pursuant to Section 12(b) of the Act: None

           Securities registered pursuant to Section 12(g) of the Act:
                         Common Stock ($0.033 par value)
          Series A Junior Participating Preferred Stock Purchase Rights

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 [ ]

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K is not contained  herein,  and will not be contained,  to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]

Indicate  by check mark  whether  the  registrant  is an  accelerated  filer (as
defined in Rule 12b-2 of the Act). Yes [X] No [ ]

On December 31, 2003,  the last business day of the  registrant's  most recently
completed second fiscal quarter,  the aggregate market value of the registrant's
common stock ($0.033 par value) held by  non-affiliates  (6,241,266  shares) was
approximately  $89.2  million,  based upon the  reported  last sale price of the
common stock on that date. The exclusion from such amount of the market value of
shares of common  stock owned by any person  shall not be deemed an admission by
the registrant that such person is an affiliate of the registrant.

The number of  outstanding  shares of the  registrant's  common  stock as of the
close of business on September 9, 2004 was 9,760,550.

                       Documents Incorporated by Reference
       Part III of Form 10-K - Portions of Definitive Proxy Statement for
                     the 2004 Annual Meeting of Stockholders
<PAGE>


                               CELADON GROUP, INC.
                                    FORM 10-K

                                TABLE OF CONTENTS

<TABLE>
                                                                                                           Page
PART I
         <S>             <C>                                                                                 <C>
         Item 1.         Business.........................................................................    3
         Item 2.         Properties.......................................................................   10
         Item 3.         Legal Proceedings................................................................   10
         Item 4.         Submission of Matters to a Vote of Security Holders..............................   10

PART II

         Item 5.         Market for Registrant's Common Stock and Related
                             Stockholder Matters..........................................................   11
         Item 6.         Selected Financial Data..........................................................   12
         Item 7.         Management's Discussion and Analysis of Financial
                             Condition and Results of Operations..........................................   13
         Item 7A.        Quantitative and Qualitative Disclosures About
                             Market Risk..................................................................   24
         Item 8.         Financial Statements and Supplementary Data......................................   25
         Item 9.         Changes in and Disagreements with Accountants on
                             Accounting and Financial Disclosure..........................................   49
         Item 9A.        Controls and Procedures..........................................................   49

PART III

         Item 10.        Directors and Executive Officers of the Registrant...............................   50
         Item 11.        Executive Compensation...........................................................   50
         Item 12.        Security Ownership of Certain Beneficial Owners
                             And Management and Related Stockholder Matters...............................   50
         Item 13.        Certain Relationships and Related Transactions...................................   50
         Item 14.        Principal Accountant Fees and Services...........................................   50

PART IV

         Item 15.        Exhibits, Financial Statement Schedules
                             and Reports On Form 8-K......................................................   51

SIGNATURES................................................................................................   55
</TABLE>
                                      -2-

<PAGE>
                                     PART I

Disclosure Regarding Forward Looking Statements

     The  Private  Securities  Litigation  Reform  Act of 1995  provides a "safe
harbor" for forward-looking statements. Certain information in Items 1, 3, 7, 7A
and 8 of this  Form  10-K  constitutes  forward-looking  statements  within  the
meaning of the Private  Securities  Litigation  Reform Act of 1995 and, as such,
involve known and unknown risks, uncertainties and other factors which may cause
the actual  results,  events,  performance or  achievements of the Company to be
materially   different  from  any  future   results,   events,   performance  or
achievements expressed or implied by such forward-looking statements. Words such
as  "anticipates,"   "estimates,"  "expects,"  "projects,"  "intends,"  "plans,"
"believes," and words or terms of similar  substance used in connection with any
discussion of future operating results, financial performance, or business plans
identify forward-looking  statements. All forward-looking statements reflect our
management's present expectation of future events and are subject to a number of
important  factors and  uncertainties  that could cause actual results to differ
materially from those described in the forward-looking  statements.  While it is
impossible to identify all factors that may cause actual results to differ,  the
risks and uncertainties that may affect the Company's business,  performance and
results of operations include the factors listed on Exhibit 99.1 to this report,
which  is  incorporated  herein  by  reference.   Subsequent  written  and  oral
forward-looking  statements attributable to the Company or persons acting on its
behalf are expressly qualified in their entirety by the cautionary statements in
this paragraph and elsewhere in this Form 10-K.

     All such forward-looking  statements speak only as of the date of this Form
10-K. The Company  expressly  disclaims any obligation or undertaking to release
publicly any updates or revisions to any  forward-looking  statements  contained
herein to reflect any change in the Company's  expectations  with regard thereto
or any change in events, conditions or circumstances on which any such statement
is based.

     For  these  statements,  we claim the  protection  of the safe  harbor  for
forward-looking  statements  contained in Section 27A of the  Securities  Act of
1933,  as  amended,  and  Section  21E of the  Securities  Exchange  Act of 1934
("Exchange Act"), as amended.

     References to the  "Company",  "Celadon",  "we",  "us",  "our" and words of
similar import refer to Celadon Group, Inc. and its consolidated subsidiaries.

Item 1.  Business

Introduction

     We are  one of  North  America's  fifteen  largest  truckload  carriers  as
measured by revenue. We generated $397.9 million in operating revenue during our
fiscal  year  ended  June  30,  2004.  We have  grown  significantly  since  our
incorporation in 1986 through internal growth and a series of acquisitions since
1995. As a dry van truckload carrier,  we generally transport full trailer loads
of freight from origin to destination  without  intermediate  stops or handling.
Our customer base includes Fortune 500 shippers such as DaimlerChrysler, General
Electric, Philip Morris, Wal-Mart, Procter & Gamble, DuPont, and Target.

     We operate in two main market sectors. In our international  operations, we
offer time-sensitive transportation in and between the United States and its two
largest trading partners, Mexico and Canada. We generated nearly one-half of our
revenue  in  fiscal  2004  from  international  movements,  and we  believe  our
approximately  125,000 annual border  crossings make us the largest  provider of
international  truckload  movements  in  North  America.  We  believe  that  our
strategically  located terminals and experience with the language,  culture, and
border  crossing   requirements  of  each  North  American   country  provide  a
competitive advantage in the international trucking marketplace.

     We believe  our  international  operations,  particularly  those  involving
Mexico,  offer an attractive  business  niche for several  reasons.  First,  the
additional  complexity and the need to establish  cross-border business partners
and to develop a strong  organization and an adequate  infrastructure  in Mexico
afford some barriers to  competition  that are not present in  traditional  U.S.
truckload  service.  Second,  the expected continued growth of Mexico's economy,
particularly exports to the U.S., positions us to capitalize on our cross-border
expertise.  Third, we believe

                                      -3-
<PAGE>
the  opening  of the  border to  Mexican  drivers  could  provide us with a cost
advantage based on differences in wages.  The U.S.  Supreme Court recently ruled
that the United  States can let  Mexican  trucks  cross the border  without  the
United  States  having to conduct the  environmental  study  mandated by a lower
court ruling.  How to implement the border  opening  process is currently  being
evaluated.

     Our  success is largely  dependent  upon the success of our  operations  in
Mexico  and   Canada,   and  we  are   subject   to  risks  of  doing   business
internationally,  including  fluctuations in foreign currencies,  changes in the
economic  strength of the  countries  in which we do business,  difficulties  in
enforcing contractual  obligations and intellectual property rights,  burdens of
complying  with a wide variety of  international  and United  States  export and
import laws and social,  political,  and economic instability.  Additional risks
associated with our foreign operations, including restrictive trade policies and
imposition of duties, taxes or government royalties by foreign governments,  are
present but largely mitigated by the terms of NAFTA.  Information  regarding our
revenue derived from foreign external customers and long-lived assets located in
foreign  countries  is  set  forth  in  Note  11 to the  consolidated  financial
statements filed as part of this report.

     In  addition  to our  international  business,  we  offer a broad  range of
truckload  transportation services within the United States, including regional,
long-haul,  dedicated, and logistics. With the acquisitions of certain assets of
Burlington  Motor Carriers in March 2002 and Highway  Express in August 2003, we
expanded  our  operations  and service  offerings  within the United  States and
significantly  improved our lane density,  freight mix, and customer  diversity.
The Highway Express acquisition was particularly important to us, and we believe
it has contributed to our recent operating improvements.

     We also operate  TruckersB2B,  Inc., a profitable  marketing  business that
affords volume  purchasing power for items such as fuel, tires, and equipment to
approximately 16,480 member trucking fleets representing  approximately  437,500
tractors.  TruckersB2B  represents a separate  operating segment under generally
accepted  accounting  principles.  Information  regarding  revenue,  profits and
losses,  and total assets of our  transportation  and  e-commerce  (TruckersB2B)
operating  segments  is set  forth  in  Note  11 to the  consolidated  financial
statements filed as part of this report.

Operating and Marketing Strategy

     We approach our trucking  operations as an integrated  effort of marketing,
customer  service,  and fleet  management.  As a part of our strategic  plan, we
identified as priorities:  increasing our freight rates; decreasing our reliance
on DaimlerChrysler and other automotive industry customers;  raising our service
standards;  rebalancing lane flows to enhance asset utilization; and identifying
and acquiring  suitable  acquisition  candidates  and  successfully  integrating
acquired operations.  To accomplish these objectives,  we have sought to instill
high levels of  discipline,  cooperation,  and trust between our  operations and
sales departments and have consolidated the two departments under the leadership
of our Chief Operating  Officer,  Tom Glaser. As a part of this combined effort,
our operations and sales  departments  have developed the following  strategies,
goals, and objectives:

     o    Seeking high  yielding  freight from targeted  industries,  customers,
          regions,  and lanes that  improves  our  overall  network  density and
          diversifies  our customer and freight mix. We believe that by focusing
          our sales and marketing resources on target customers who have freight
          with  specific  cross-border  or  international  needs,  who ship high
          volumes of freight in lanes or regions where we already have equipment
          capacity  positioned,  or who have shipping  needs in several  regions
          that we serve, we can improve our equipment utilization,  increase our
          average revenue per mile, and lower our average cost per mile. We have
          implemented  yield  management  efforts that involve specific rate and
          productivity  goals for new and  existing  business.  As part of these
          efforts,  we generally are seeking to replace less profitable  freight
          with more favorable freight and to implement  selective rate increases
          where possible. We believe that by reducing our exposure to automotive
          shippers such as DaimlerChrysler and increasing the amount of business
          that we do with less cyclical shippers,  such as consumer products and
          non-durables  companies, we will have more opportunities to pursue and
          obtain rate increases.

     o    Focusing on asset productivity.  Our primary  productivity  measure is
          revenue per tractor per week.  Within revenue per tractor,  we examine
          freight rates,  non-revenue miles, and miles per tractor.  We actively
          analyze  customers  and freight  movements in an effort to enhance the
          revenue production of our tractors. We also attempt to concentrate our
          equipment  in  defined  operating  lanes to  create  more

                                      -4-
<PAGE>
          predictable  movements,  reduce  non-revenue  miles,  and shorten turn
          times between loads. As a result of our recent  initiatives to improve
          asset  productivity,  automotive  parts now  comprise a  significantly
          lower   proportion   of  our  overall   freight  mix  than  they  have
          historically,  having been replaced primarily by consumer non-durables
          and other retail products.

     o    Operating  a modern  fleet to reduce  maintenance  costs  and  improve
          safety and driver retention.  We believe that updating our tractor and
          trailer  fleets  will  produce  several   benefits,   including  lower
          maintenance and tire expenses, and enhanced safety, driver recruitment
          and retention,  and equipment utilization.  We recently have taken two
          important steps towards  modernizing  our fleet.  First, in the second
          quarter of fiscal 2001,  we shortened  the  replacement  cycle for our
          tractors  from  five  years to four  years.  Second,  as a  result  of
          continuing  changes  in our  customer  base,  in the first  quarter of
          fiscal  2004 we made  arrangements  to  replace  all of the  remaining
          48-foot trailers in our fleet with new 53-foot trailers. These changes
          could  produce  significant  benefits  because  maintenance  and  tire
          expenses increase significantly for tractors beyond the fourth year of
          operation and for trailers  beyond the seventh year of  operation,  as
          wear and tear increases and some warranties  expire.  In addition,  we
          anticipate  our adoption of a uniform  fleet of 53-foot  trailers will
          allow us to operate fewer total trailers.

     o    Continuing our emphasis on service,  safety, and technology.  We offer
          just-in-time, time-definite, and other premium transportation services
          to meet the expectations of our service-oriented customers. We believe
          that targeting  premium  service  freight  permits us to obtain higher
          rates,  build long-term,  service-based  customer  relationships,  and
          avoid competition from railroad,  intermodal,  and trucking  companies
          that compete  primarily  on the basis of price.  We believe our recent
          safety record has been among the best in our industry.  In March 2003,
          we were awarded first place in fleet safety among all truckload fleets
          that  log more  than  100  million  miles  per  year at the  Truckload
          Carriers  Association  Annual  Conference.  We have  made  significant
          investments in technologies that are intended to reduce costs,  afford
          a competitive advantage with service-sensitive  customers, and promote
          economies  of  scale.  Examples  of these  technologies  are  Qualcomm
          satellite-based  tracking and communications  systems, our proprietary
          CelaTrac  system that enables  customers to track shipments and access
          other information via the Internet,  and document imaging.  We believe
          we are the only carrier  offering  Internet  shipment  tracking in all
          three North American countries.

     o    Maintaining our leading position in cross-border  truckload  shipments
          while offering diversified,  nationwide transportation services in the
          U.S. We believe our  strategically  located  terminals and  experience
          with the languages,  cultures, and border crossing requirements of all
          three North American countries provide us with competitive  advantages
          in the  international  trucking  marketplace.  As a  result  of  these
          advantages,  we believe  we are the  industry  leader in  cross-border
          movements  between  North  American  countries.  We  supplement  these
          cross-border  shipments,  which  comprised  over 50% of our revenue in
          fiscal 2004, with domestic freight from service-sensitive customers.

     o    Seeking  strategic  acquisitions  to  broaden  our  existing  domestic
          operations.  We have made seven trucking  company  acquisitions  since
          1995 (including our acquisition of Cheetah Transportation,  Inc. which
          we  disposed of in June 2001),  and  continue to evaluate  acquisition
          candidates.  Our current  acquisition  strategy,  as  evidenced by our
          purchases of certain  assets of Burlington  Motor Carriers in 2002 and
          Highway  Express  in 2003,  is  focused  on  broadening  our  domestic
          operations  through the  addition of  carriers  that  improve our lane
          density, customer diversity, and service offerings.

     o    Capitalizing on the opening of the  U.S.-Mexican  border.  In December
          2001, the U.S. Congress enacted legislation  providing for the opening
          of the Mexican border consistent with NAFTA. The opening of the border
          would for the first time permit Mexican  drivers to move loads without
          restrictions  between  Mexico  and points in the U.S.  On January  16,
          2003, a U.S. federal appeals court ruled that the border opening would
          be delayed pending an environmental  study. The matter was appealed to
          the U.S.  Supreme  Court,  which recently ruled that the United States
          can let Mexican  trucks  cross the border  without  the United  States
          having to conduct the environmental study. How to implement the border
          opening  process  currently is being  evaluated.  Due to our extensive
          experience  managing  drivers  in Mexico  through  Jaguar,  our Mexico
          City-based subsidiary,  we believe that we are well positioned to take
          advantage of the opportunities associated with the eventual opening of
          the  border.  In  particular,   we  expect  to  be  able  to  generate
          significant  cost savings by utilizing  lower cost Mexican  drivers in
          the U.S. on shipments to and from Mexico.

                                      -5-
<PAGE>
Other Services

     TruckersB2B.  Our TruckersB2B subsidiary is a profitable marketing business
that affords volume purchasing power for items such as fuel,  tires,  insurance,
and other  products and services to small and  medium-sized  trucking  companies
through  its  website,  www.truckersb2b.com.   TruckersB2B  provides  small  and
medium-sized  trucking company members with the ability to cut costs and thereby
compete more effectively and profitably with the larger fleets.  TruckersB2B has
approximately 16,480 member trucking fleets representing  approximately  437,500
tractors. Over the past four years,  TruckersB2B has improved to $8.1 million in
revenue  and an  operating  profit of $1.5  million  in fiscal  2004,  from $4.4
million  in  revenue  and an  operating  loss of $2.3  million  in fiscal  2001.
TruckersB2B continues to introduce  complementary products and services to drive
its growth and attract new fleets.  For example,  TruckersB2B  recently  entered
into a marketing  arrangement with a leading  provider of insurance  products to
the  trucking  industry.   We  believe  this  represents  a  significant  growth
opportunity for TruckersB2B.

     Kuwait Joint  Venture.  In February  2004,  we entered into a joint venture
arrangement with a Kuwaiti  investment group pursuant to which we have agreed to
manage a trucking  operation  based in Kuwait.  This  venture has been formed to
provide  transportation  services to suppliers involved in rebuilding efforts in
Iraq.  The joint  venture  will operate  under the name  Celadon East  Transport
Company, SAK.

     Under the terms of this arrangement, the Kuwaiti investment group will fund
all start-up costs,  historical and future capital  requirements,  and operating
expenses,  while  we  will  provide  operational,   marketing,   logistics,  and
management  services to the joint venture.  In exchange for these  services,  we
will  receive  a portion  of the joint  venture's  operating  income,  a monthly
management fee, and reimbursement of our costs. In addition,  we have the option
to acquire up to a 49% interest in the joint  venture.  We have no obligation to
fund operating losses.  John Hekman,  who joined us following our acquisition of
certain  assets  of  Highway  Express  in  August  2003,  where  he was the Vice
President of  Administration,  is directing the  development  of our gulf region
operations and is responsible  for the joint  venture's  government and military
contracting activities.  David Shatto, our Executive Vice President -- Corporate
Development,  is  responsible  for management  oversight of the venture,  a role
which he will fulfill primarily from our Indianapolis  headquarters.  Other than
Mr. Hekman's assignment and Mr. Shatto's oversight  responsibilities,  we do not
expect to transfer any employees to, or have any other  resources from our North
American operations engaged in, the joint venture.

     Zipp  Logistics.   Through  our  subsidiary,  Zipp  Logistics,  we  provide
warehousing  services to three Fortune 500 companies.  Our warehouse  facilities
are located near our  customers'  manufacturing  plants.  We also  transport the
manufacturing component parts to our warehouses and sequence those parts for our
customers. We then transport completed units from our customers' plants.

Industry and Competition

     The full  truckload  market is defined by the quantity of goods,  generally
over 10,000 pounds,  shipped by a single customer  point-to-point and is divided
into several segments by the type of trailer used to transport the goods.  These
segments include van,  temperature-controlled,  flatbed,  and tank carriers.  We
participate in the North American van truckload  market.  The markets within the
United States, Canada, and Mexico are fragmented, with thousands of competitors,
none of whom  dominates  the  market.  We  believe  that  the  current  economic
pressures will continue to force many smaller and private fleets into mergers or
to exit the industry.

     Transportation  of goods by truck between the United  States,  Canada,  and
Mexico is subject to the  provisions of NAFTA.  United States and Canadian based
carriers may operate within both countries.  United States and Canadian carriers
are not allowed to operate within Mexico,  and Mexican  carriers are not allowed
to operate  within  the United  States  and  Canada,  in each case  except for a
26-kilometer,  or approximately 16 miles,  band along either side of the Mexican
border.  Trailers  may cross  all  borders.  We are one of a  limited  number of
trucking  companies that participates in all three segments of this cross border
market, providing true door-to-door carriage.

     Transportation  of goods  between  the  United  States or Canada and Mexico
consists  of three  components:  (i)  transport  from the point of origin to the
Mexican border,  (ii) drayage,  which is transportation  across the border,  and
(iii)  transportation  from the  border  to the  final  destination.  While  the
truckload industry is highly competitive and fragmented, we are one of a limited
number  of  companies  that is able  to  provide  or  arrange  for  door-to-door

                                      -6-
<PAGE>
transport  service  between  points in the United  States,  Canada  and  Mexico.
Although both service and price drive competition in the premium long haul, time
sensitive  portion of the market, we rely primarily on our high level of service
to attract customers. This strategy requires us to focus on market segments that
employ   just-in-time   inventory  systems  and  other  premium  services.   Our
competitors  for freight include other  long-haul  truckload  carriers and, to a
lesser extent,  medium-haul  truckload  carriers and railroads.  We also compete
with other trucking companies for the services of drivers. Some of the truckload
carriers with which we complete have greater financial  resources,  operate more
revenue equipment, and carry a larger total volume of freight than us.

     TruckersB2B  is a  business-to-business  savings  program,  for  small  and
mid-sized fleets.  Competitors  include other large trucking companies and other
business-to-business buying programs.

Customers

     We target large  service-sensitive  customers with  time-definite  delivery
requirements  throughout  the United  States,  Canada and Mexico.  Our customers
frequently ship in the north-south  lanes (i.e., to and from locations in Mexico
and locations in the United States and Eastern Canada).  The sales and marketing
personnel  in our offices  work  together to source  northbound  and  southbound
transport,  in addition to other transportation  solutions. We currently service
in excess of 2,900 trucking customers. Our premium service to these customers is
enhanced  by  a  high  trailer-to-tractor  ratio,  state-of-the-art  technology,
well-maintained tractors and trailers, and 24/7 dispatch and reporting services.
The principal  types of freight  transported  include  automotive  parts,  paper
products,  manufacturing parts,  semi-finished products,  textiles,  appliances,
retail and toys.

     Our largest customer is DaimlerChrysler,  which accounted for approximately
9%,  12%,  and 19% of our  total  revenue  for  fiscal  2004,  2003,  and  2002,
respectively.  We transport  DaimlerChrysler original equipment automotive parts
primarily between the United States and Mexico, and DaimlerChrysler after-market
replacement parts and accessories within the United States. We have an agreement
with DaimlerChrysler for international freight for the Chrysler division,  which
expires in October  2006.  No other  customer  accounted for more than 5% of our
total revenue during any of our three most recent fiscal years.

Drivers and Personnel

     At June 30, 2004, we employed  3,091  persons,  of whom 2,150 were drivers,
204 were truck maintenance personnel, 583 were administrative personnel, and 154
were dedicated services personnel and TruckersB2B personnel. None of our U.S. or
Canadian employees are represented by a union or a collective bargaining unit.

     Driver recruitment, retention, and satisfaction are essential components of
our  success.  Competition  to  recruit  and  retain  drivers  is intense in the
trucking  industry.  There has been and  continues to be a shortage of qualified
drivers in the  industry.  Drivers are  selected  in  accordance  with  specific
guidelines,  relating  primarily  to safety  records,  driving  experience,  and
personal  evaluations,  including  a physical  examination  and  mandatory  drug
testing. Our drivers attend an orientation program and ongoing driver efficiency
and safety  programs.  An increase in driver turnover can have a negative impact
on the results of operations.

     Independent  contractors are utilized  through a contract with us to supply
one or more tractors and drivers for our use.  Independent  contractors must pay
their own tractor expenses,  fuel,  maintenance,  and driver costs and must meet
our specified  guidelines with respect to safety. A lease-purchase  program that
we offer provides  independent  contractors  the  opportunity to  lease-to-own a
tractor  from us. As of June 30,  2004,  there were 358  independent  contractor
tractors  and 94  lease-purchase  independent  contractor  tractors  providing a
combined 18% of our tractor capacity.

Revenue Equipment

     Our equipment strategy is to utilize late-model  tractors and high-capacity
trailers,  actively  manage  equipment  throughout its life cycle,  and employ a
comprehensive service and maintenance program.

     Over the past several  years,  we have  determined  that the average annual
cost of  maintenance  and tires for  tractors in our fleet  rises  substantially
after the first four years due to a combination of greater wear and tear and the
expiration of some warranty  coverages.  We believe these costs rise late in the
trade cycle for our trailers as well. We

                                      -7-
<PAGE>
anticipate  that we will achieve ongoing savings in maintenance and tire expense
by replacing tractors and trailers more often. In addition, we believe operating
newer  equipment  will  enhance our driver  recruiting  and  retention  efforts.
Accordingly,  we recently have shortened our normal tractor replacement cycle to
four years of service from five years of service.  We further reduce exposure to
declines in the resale value of our equipment by entering into  agreements  with
certain manufacturers  providing for pre-established resale values upon trade-in
of existing  equipment.  Approximately  72% of tractors  and 39% of trailers are
under these arrangements.

     The  average  age of  our  owned  and  leased  tractors  and  trailers  was
approximately  2.1  and  4.6  years,   respectively,   at  June  30,  2004,  and
approximately  2.7 and 6.1 years,  respectively,  at June 30, 2003. We utilize a
comprehensive  maintenance  program to minimize downtime and control maintenance
costs.  Centralized purchasing of spare parts and tires, and centralized control
of over-the-road repairs are also used to control costs.

Fuel

     We purchase  the  majority  of our fuel  through a network of over 100 fuel
stops  throughout the United States and Canada.  We have  negotiated  discounted
pricing based on certain volume  commitments  with these fuel stops. We maintain
bulk fueling  facilities in  Indianapolis,  Laredo,  and  Kitchener,  Ontario to
further reduce fuel costs.

     Shortages of fuel,  increases in prices or rationing of petroleum  products
can have a materially adverse effect on our operations and  profitability.  Fuel
is subject to  economic,  political  and market  factors that are outside of our
control. We have historically been able to recover a portion of high fuel prices
from customers in the form of fuel  surcharges.  However,  a portion of the fuel
expense  increase is not  recovered due to several  factors,  including the base
fuel price levels which determine when  surcharges are collected,  truck idling,
empty miles between freight shipments, and out-of-route miles. We cannot predict
whether  high fuel price  levels will occur in the future or the extent to which
fuel surcharges will be collected to offset such increases.

Regulation

     Our  operations are regulated and licensed by various United States federal
and state,  Canadian  provincial and Mexican federal agencies.  Interstate motor
carrier operations are subject to safety  requirements  prescribed by the United
States Department of Transportation  (DOT). Such matters as weight and equipment
dimensions  are also subject to United States  federal and state  regulation and
Canadian provincial regulations.  We operate in the United States throughout the
48  contiguous  states  pursuant to operating  authority  granted by the Federal
Highway  Administration,  in various  Canadian  provinces  pursuant to operation
authority granted by the Ministries of Transportation and Communications in such
provinces,  and  within  Mexico  pursuant  to  operating  authority  granted  by
Secretaria  de  Communiciones  y  Transportes.  To the  extent  that we  conduct
operations  outside the United  States,  we are  subject to the Foreign  Corrupt
Practices  Act,  which  generally  prohibits  United States  companies and their
intermediaries  from bribing  foreign  officials for the purpose of obtaining or
retaining favorable treatment.

     Beginning  January 4, 2004,  carriers  were required to comply with several
changes  to DOT  hours-of-service  requirements  that  may  have a  positive  or
negative  effect on driver  hours (and  miles).  The new rules allow  drivers to
drive up to 11 hours instead of the 10 hours permitted under prior  regulations,
subject to the new  14-hour  on-duty  maximum  described  below.  The rules will
require a driver's  off-duty  period to be 10 hours,  compared  to 8 hours under
prior  regulations.  In  general,  drivers  may not  drive  beyond 14 hours in a
24-hour period,  compared to not being permitted to drive after 15 hours on-duty
under the prior rules.  During the new 14-hour  consecutive  on-duty period, the
only way to extend the on-duty period is by the use of a sleeper berth period of
at least two hours that is later  coupled with a second  sleeper  berth break to
equal 10 hours.  Under the prior  rules,  during  the  15-hour  on-duty  period,
drivers were allowed to take multiple breaks of varying  lengths of time,  which
could be either  off-duty time or sleeper berth time, that did not count against
the 15-hour period.  There was no change to the rule that precludes drivers from
driving  after being  on-duty for a maximum of 70 hours in 8  consecutive  days.
However,  under the new rules, drivers can "restart" their 8-day clock by taking
at least 34 consecutive hours off duty.

     Recently a citizens' advocacy group successfully petitioned the courts that
the new rules were  developed  without  driver health in mind. The Federal Motor
Carrier Safety  Administration  ("FMCSA") was given until the end of August 2004
to propose new rules.  The FMCSA has petitioned the court for a stay which would
allow the new rules to stay in effect while the FMCSA  reviews the rules.  It is
unclear if there will be changes to the hours-of-service  rules or the extent of
the change.  Given this  uncertainty,  we are unable to determine  the effect on
driver

                                      -8-
<PAGE>
hours and our  operations.  The DOT is also  considering  implementing  stronger
safety  requirements on trucks.  These regulatory  changes may have an impact on
our profitability in the future.

     Our  operations  are  subject  to  various   federal,   state,   and  local
environmental  laws  and  regulations,  implemented  principally  by the EPA and
similar state regulatory agencies, governing the management of hazardous wastes,
other discharge of pollutants  into the air and surface add underground  waters,
and the disposal of certain  substances.  We do not believe that compliance with
these regulations has a material effect on our capital  expenditures,  earnings,
and competitive position.

     In  addition,  the engines  used in our newer  tractors  are subject to new
emissions  control  regulations.  The EPA recently adopted new emissions control
regulations,  which require  progressive  reductions in exhaust  emissions  from
diesel  engines  through  2007.  The new  regulations  decrease  the  amount  of
emissions  that  can  be  released  by  truck  engines.   Compliance  with  such
regulations  has  increased  the  cost  of our new  tractors  and  could  impair
equipment productivity, lower fuel mileage, and increase our operating expenses.
Some manufacturers have significantly increased new equipment prices, in part to
meet new engine design requirements.

Cargo Liability, Insurance, and Legal Proceedings

     We are a party to routine litigation incidental to our business,  primarily
involving   claims  for  bodily  injury  or  property  damage  incurred  in  the
transportation of freight. We are responsible for the safe delivery of cargo. We
have increased the self-insured  retention portion of our insurance coverage for
most claims  significantly  over the past several  years.  For fiscal  2005,  we
renewed  our auto  liability  policy,  self-insuring  for  personal  injury  and
property  damage  claims for  amounts up to $2.5  million  per  occurrence.  The
following  chart reflects the major changes in our auto liability  program since
July 1, 2002:
<TABLE>
                                                                  Primary Coverage
       Coverage Period               Primary Coverage              SIR/Deductible             Primary and Excess
       ---------------               ----------------              --------------             ------------------
<S>                                    <C>                           <C>                         <C>
July 2002 - June 2003                  $11.0 million                 $1.0 million *              $26.0 million
July 2003 - June 2004                  $10.0 million                 $1.0 million **             $25.0 million
July 2004 - June 2005                  $10.0 million                 $2.5 million                $35.0 million
</TABLE>
--------------------
*    Subject to an additional $1.0 million aggregate corridor  deductible in the
     $1.0 million - $2.0 million coverage layer which could  potentially  result
     in a possible additional  self-insured  retention of up to $1.0 million for
     the coverage period.
**   Subject to an  additional  $2.75  million  self-insured  aggregate  amount,
     limited  to $1.5  million  per  occurrence,  which  resulted  in the  total
     self-insured  retention  of up to $2.5  million per  occurrence,  until the
     $2.75 million retention is utilized.

     We are also responsible for  administrative  expenses,  for each occurrence
involving  personal injury or property damage.  We are also self-insured for the
full amount of all our physical damage losses, for workers'  compensation losses
up to $1.5 million per claim,  and for cargo claims up to $100,000 per shipment.
Subject  to  these  self-insured   retention   amounts,   our  current  workers'
compensation  policy provides coverage up to a maximum per claim amount of $10.0
million,  and our current cargo loss and damage coverage provides coverage up to
$1.0 million per shipment.  We maintain separate  insurance in Mexico consisting
of bodily  injury and property  damage  coverage  with  acceptable  deductibles.
Management  believes our uninsured exposure is reasonable for the transportation
industry, based on previous history.

     There are various claims,  lawsuits, and pending actions against us and our
subsidiaries  that arise in the normal  course of  business.  We believe many of
these  proceedings are covered in whole or in part by insurance and that none of
these  matters  will  have a  materially  adverse  effect  on  our  consolidated
financial position or results of operations in any given period.

Seasonality

     We have  substantial  operations  in the  Midwestern  and Eastern  U.S. and
Canada. In those geographic regions,  our tractor  productivity may be adversely
affected  during the winter  season  because  inclement  weather  may impede our
operations.  Moreover,  some  shippers  reduce their  shipments  during  holiday
periods as a result of curtailed  operations or vacation shutdowns.  At the same
time,  operating expenses  generally  increase,  with fuel

                                      -9-
<PAGE>
efficiency  declining because of engine idling and harsh weather creating higher
accident frequency, increased claims, and more equipment repairs.

Internet Website

     We maintain an Internet website where additional information concerning our
business can be found.  The address of that website is  www.celadontrucking.com.
All of our  reports  filed with or  furnished  to the  Securities  and  Exchange
Commission  ("SEC")  pursuant  to Section  13(a) or 15(d) of the  Exchange  Act,
including  our annual  report on Form10-K,  quarterly  reports on Form 10-Q,  or
current  reports on Form 8-K, and amendments  thereto are made available free of
charge on or through  our  Internet  website as soon as  reasonably  practicable
after such reports are electronically filed with or furnished to the SEC.

Non-Audit Services Performed by Independent Accountants

     We are  responsible  for  disclosing to investors  the  non-audit  services
pursuant to Section  10A(i)(2) of the  Exchange  Act, as added by Section 202 of
the Sarbanes-Oxley Act of 2002. Non-audit services are defined as services other
than  those  provided  in  connection  with an audit or review of our  financial
statements.  Our  current  non-audit  services  consist  of  a  tax  outsourcing
agreement  with Ernst & Young LLP,  which was  approved  by our Audit  Committee
prior to commencement.  Future non-audit  services will be processed in the same
manner.

Item 2.  Properties

     We operate a network of 18  terminal  locations,  including  facilities  in
Laredo and El Paso,  Texas,  which are the two largest  inland  freight  gateway
cities  between the U.S.  and Mexico.  Our  operating  terminals  currently  are
located in the following cities:
<TABLE>
         United States                             Mexico                              Canada
---------------------------------     ---------------------------------    --------------------------------
<S>                                   <C>                                  <C>
Baltimore, MD (Leased)                Guadalajara (Leased)                 Kitchener, ON (Leased)
Dallas, TX (Owned)                    Mexico City (Leased)
Detroit, MI (Leased)                  Monterrey (Leased)
El Paso, TX (Owned)                   Nueva Laredo (Leased)
Greensboro, NC (Leased)               Puebla (Leased)
Hampton, VA (Leased)                  Queretero (Leased)
Indianapolis, IN (Leased)             Tijuana (Leased)
Laredo, TX (Owned)
Louisville, KY (Leased)
Richmond, VA (Leased)
</TABLE>
     Our executive and  administrative  offices occupy four buildings located on
30 acres of property in Indianapolis,  Indiana.  The Indianapolis,  Laredo,  and
Kitchener  terminals  include  administrative  functions,  lounge facilities for
drivers, parking, fuel, maintenance,  and truck washing facilities. A portion of
the Indianapolis facility is used for the operations of Truckers B2B. All of our
other owned and leased facilities are utilized exclusively by our transportation
segment.

Item 3.  Legal Proceedings

     See discussion under "Cargo Liability, Insurance, and Legal Proceedings" in
Item 1, and Note 10 to the consolidated  financial statements,  "Commitments and
Contingencies."  In the fourth  quarter of fiscal  2004,  we were  involved in a
significant  accident for which we have reserved $2.75 million,  which amount is
comprised of the entire amount of our self-insured  retention,  or $2.5 million,
and anticipated legal and related expenses.

Item 4.  Submission of Matters to a Vote of Security Holders

     No matters  were  submitted  for a vote of  security  holders,  through the
solicitation of proxies or otherwise, during the quarter ended June 30, 2004.

                                      -10-

<PAGE>
                                     PART II

Item 5.  Market for Registrant's Common Stock and Related Stockholder Matters

Price Range of Common Stock

     Our common stock is listed on the NASDAQ  National  Market under the symbol
"CLDN." The  following  table sets forth the range of high and low bid prices as
quoted on the NASDAQ National Market for the periods indicated:

          Fiscal 2003                            High           Low
---------------------------------               ------        -------
Quarter ended September 30, 2002                $13.12        $ 7.12
Quarter ended December 31, 2002                 $12.20        $ 7.85
Quarter ended March 31, 2003                    $13.04        $ 7.45
Quarter ended June 30, 2003                     $10.01        $ 7.10

          Fiscal 2004
---------------------------------
Quarter ended September 30, 2003                $14.48        $ 8.93
Quarter ended December 31, 2003                 $14.73        $11.55
Quarter ended March 31, 2004                    $16.79        $12.69
Quarter ended June 30, 2004                     $18.00        $13.49

     On September 8, 2004,  there were  approximately  130 holders of our Common
Stock based upon the number of record  holders on that date. We estimate that we
have approximately 2,000 stockholders because a substantial number of shares are
held of record by brokers or dealers for their customers in street names.

Dividend Policy

     We have never paid a cash dividend on our common stock. We currently intend
to continue to retain  earnings to finance the growth of our business and reduce
our indebtedness rather than to pay dividends. Our ability to pay cash dividends
currently  is  prohibited  by  restrictions  contained in our  revolving  credit
facility.  Future  payments  of cash  dividends  will  depend  on our  financial
condition,  results of operations,  capital commitments,  restrictions under our
then-existing  debt  agreements,  and other  factors our board of directors  may
consider relevant.

Equity Compensation Plan Information

     The following table summarizes our equity compensation plans as of June 30,
2004:
<TABLE>
                                                                                                       (c)
                                                                                              Number of securities
                                                                                              remaining available
                                                (a)                       (b)                  for future issuance
                                       Number of securities        Weighted-average               under equity
                                       issued upon exercise         exercise price of           compensation plans
                                      of outstanding options      outstanding options,        (excluding securities
    Plan Category                      warrants and rights       warrants and rights        reflected in column (a))
------------------------------       ------------------------    ---------------------      ------------------------
<S>                                       <C>                        <C>                         <C>
Equity compensation plans
 approved by security holders               1,001,551                   $6.55                       120,569
Equity compensation plans not
 approved by security holders             Not applicable             Not applicable              Not applicable
</TABLE>

                                      -11-
<PAGE>
Item 6.  Selected Financial Data

     The statement of operations  data and balance  sheet data  presented  below
have been derived from our consolidated  financial  statements and related notes
thereto.  The  information  set forth below should be read in  conjunction  with
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations" and our consolidated financial statements and related notes thereto.
<TABLE>
                                                     2004         2003        2002        2001        2000
                                                  ---------    ---------   ---------   ---------   ---------
                                            (in thousands, except per share data, operating data, and percentages)
Statement of Operations Data:
<S>                                                <C>          <C>         <C>         <C>         <C>
Operating revenue...............................   $397,923     $367,105    $336,999    $351,818    $351,569
Operating expense(1)............................    390,852      354,371     326,454     351,162     345,991
                                                  ---------    ---------   ---------   ---------    --------

Operating income(1).............................      7,071       12,734      10,545         656       5,578
Interest expense, net(2)........................      3,723        6,201       7,487       9,280       9,238
Other expense (income)..........................        180           (3)        134        (331)        256
Minority interest in subsidiary..................       ---          ---         ---        (331)       (547)
                                                  ---------    ---------   ---------   ---------    --------
Income (loss) before income taxes...............      3,168        6,536       2,924      (7,962)     (3,369)
Provision (benefit) for income taxes.............     3,443        2,948       1,215      (2,626)     (1,328)
                                                  ---------    ---------   ---------   ---------    --------
Net income (loss)(1)(2).........................   $   (275)    $  3,588    $  1,709    $ (5,336)   $ (2,041)
                                                  ==========   =========   =========   ==========  ==========
Diluted earnings (loss) per share (1)(2)........   $  (0.03)    $   0.45    $   0.22    $  (0.70)   $  (0.26)
                                                  ==========   =========   =========   ==========  ==========
Weighted average diluted shares outstanding.....      7,986        8,035       7,753       7,649       7,777

Balance Sheet Data (at end of period)
  Working capital...............................   $ 20,108     $  8,343    $ 12,905    $ 13,352    $ 22,087
  Total assets..................................    151,310      162,073     190,031     194,916     215,322
  Long-term debt, revolving lines of credits,
      and capital lease obligations, including
      current maturities........................     14,494       60,794      97,022     105,245     115,446
  Stockholders' equity..........................     82,830       57,252      53,916      52,063      58,407

Operating Data:
  For period(3):
  Average revenue per loaded mile (4)...........   $  1.322     $  1.266    $  1.232     $ 1.236    $  1.258
  Non-revenue miles percentage..................        7.4%         7.7%        7.9%        8.0%        7.7%
  Average revenue per total mile (4)............   $  1.225     $  1.169    $  1.134     $ 1.137    $  1.160
  Average revenue per tractor per week(4).......   $  2,723     $  2,546    $  2,548     $ 2,533    $  2,552
  Average length of haul........................        994          942         950         987       1,098
At end of period:
  Total tractors(5).............................      2,531        2,491       2,568       2,368       2,580
  Average age of company tractors (in years)(6).        2.1          2.7         2.3         2.0         2.2
  Total trailers(5) ............................      6,966        7,142       6,758       6,537       7,042
  Average age of company trailers (in years)(6).        4.6          6.1         4.8         4.2         3.8
---------------------
(1)  Includes:  (a) a $3.3 million pretax loss on the  disposition of equipment in the quarter ended  September 30, 1999; (b) a $0.8
     million pretax  write-off of deferred initial public offering costs for TruckersB2B in the year ended June 30, 2001; (c) a $3.7
     million  pretax loss on disposal of former  flatbed  unit in the quarter  ended June 30, 2001;  and (d) a $9.8  million  pretax
     impairment  charge in the quarter ended September 30, 2003,  relating to the disposition of our  approximately  1,600 remaining
     48-foot trailers.
(2)  Includes a $0.9 million pretax write-off of loan origination  costs relating to replacement of a credit facility in the quarter
     ended September 30, 2002.
(3)  Unless  otherwise  indicated,  operating data and  statistics  presented in this table and elsewhere in this report are for our
     truckload revenue and operations and exclude revenue and operations of TruckersB2B;  our Mexican  subsidiary,  Jaguar;  and our
     less-than  truckload,  local trucking (or  "shuttle"),  brokerage,  logistics,  and airfreight  operations.  Operating data and
     statistics  for the fiscal years ended June 30, 1999,  2000,  and 2001 also  exclude the revenue and  operations  of our former
     flatbed division. (4) Excludes fuel surcharges.
(5)  Total fleet, including equipment operated by independent contractors and our Mexican subsidiary, Jaguar.
(6)  Total company fleet, including equipment operated by our Mexican subsidiary, Jaguar.
</TABLE>

                                      -12-
<PAGE>
Item 7.  Management's Discussion and Analysis of Financial Condition and
         Results of Operations

Overview

     We  are  one  of  North  America's  fifteen  largest  truckload   carriers,
generating approximately $397.9 million in operating revenue for our fiscal year
ended June 30, 2004. We have grown significantly since our incorporation in 1986
through  internal growth and a series of  acquisitions  since 1995. As a dry van
truckload  carrier,  we generally  transport  full trailer loads of freight from
origin to destination without intermediate stops or handling.  We operate in two
main market sectors. In our international  operations,  we offer  time-sensitive
transportation  in and  between the United  States and its two  largest  trading
partners,  Mexico and Canada. We generated approximately one-half of our revenue
in fiscal 2004 from  international  movements,  and we believe our approximately
125,000 annual border  crossings make us the largest  provider of  international
truckload movements in North America. In addition to our international business,
we offer a broad range of  truckload  transportation  services  within the U.S.,
including  regional,  long-haul,  dedicated,  and  logistics.  We  also  operate
TruckersB2B,  a profitable  marketing  business that affords  volume  purchasing
power for items such as fuel,  tires,  and  equipment  to  approximately  16,480
member  trucking  fleets  representing  approximately  437,500  tractors.  Under
generally accepted  accounting  principles,  TruckersB2B  constitutes a separate
operating segment.  Information regarding revenue,  profits or losses, and total
assets  of  each  of  our  operating  segments  (transportation  and  e-commerce
(TruckersB2B)) is set forth in Note 11 to the consolidated  financial statements
filed as part of this report.

     We generate  substantially  all of our revenue by transporting  freight for
our  customers.  Generally,  we are paid by the mile for our  services.  We also
derive revenue from fuel surcharges, loading and unloading activities, equipment
detention,  other  trucking-related  services,  and from  TruckersB2B.  The main
factors  that affect our  revenue  are the revenue per mile we receive  from our
customers,  the  number  of  miles  we  generate  with  our  equipment,  and the
percentage of miles for which we are compensated. These factors are affected by,
among  other  things,  the  United  States,  Mexican,  and  Canadian  economies,
customers' inventory levels, the level of capacity in our industry, and customer
demand.

     The main factors that impact our  profitability on the expense side are the
variable costs of  transporting  freight for our customers.  These costs include
fuel expense,  driver-related  expenses, such as wages, benefits,  training, and
recruitment,  and  independent  contractor  costs,  which we record as purchased
transportation.  Expenses that have both fixed and variable  components  include
maintenance  and tire expense and our total cost of insurance and claims.  These
expenses  generally vary with the miles we travel,  but also have a controllable
component based on safety,  fleet age,  efficiency,  and other factors. Our main
fixed cost is the  acquisition  and  financing  of long-term  assets,  primarily
revenue  equipment  and operating  terminals.  We have other mostly fixed costs,
such as our non-driver personnel.

     The trucking  industry has  experienced  significant  increases in expenses
over the past three years,  in  particular  those  relating to equipment  costs,
driver  compensation,  insurance,  and fuel.  As the United  States  economy has
expanded,  many trucking companies,  including Celadon,  have been able to raise
freight  rates  to  cover  the  increased  costs.   This  is  primarily  due  to
industry-wide  tight  capacity of tractors  and  trailers,  which in general has
arisen because many fleets have stated they will not add equipment until margins
improve. In addition,  competition for drivers has become increasingly  intense,
as the  expanding  economy  has  provided  alternative  jobs at the same time as
increasing  freight demand.  To obtain  capacity,  shippers have been willing to
accept the largest rate  increases in recent  memory.  As long as freight demand
continues to exceed truck  capacity,  we expect  increases in driver pay by many
carriers, which we may do as well, and higher freight rates.

     In  connection  with  our  fleet  upgrade,  we have  financed,  and plan to
continue to finance,  most of our new  tractors and  trailers  with  off-balance
sheet operating leases. As a result of our increased use of operating leases and
the application of proceeds from our recent stock issuance,  we have reduced our
balance sheet debt,  including  capital lease  obligations,  to $14.5 million at
June 30, 2004,  from $60.8  million at June 30, 2003,  and from $97.0 million at
June 30, 2002.  Financing revenue equipment  acquisitions with operating leases,
rather than  borrowings or capital leases,  moves the interest  component of our
financing activities into "above-the-line"  operating expenses on our statements
of operations. Consequently, we believe that pretax margin (income before income
taxes as a  percentage  of  operating  revenue) is a more useful  measure of our
operating  performance than operating ratio (operating  expenses as a percentage
of operating  revenue) because it eliminates the effect of our revenue equipment
financing decisions.

                                      -13-
<PAGE>
     In fiscal 2002, we began to implement a strategic  plan designed to improve
our  profitability.  The primary  components of our strategic plan are improving
our  freight  mix by  replacing  lower  yielding  freight  with more  profitable
freight;   diversifying  our  customer  base;  upgrading  our  equipment  fleet;
emphasizing  discipline  in all  aspects  of our  operations;  and  successfully
identifying  and  acquiring  suitable  acquisition  candidates  and  integrating
acquired operations. We believe the ongoing implementation of our strategic plan
has  contributed to the recent  improvements  in our operating  performance  and
profitability.

     Our operating  revenue  improved 8.4% to $397.9 million in fiscal 2004 from
$367.1  million in fiscal  2003.  We  experienced  a net loss of $0.3 million in
fiscal 2004  compared to net income of $3.6  million in 2003.  Included in those
results were a $9.8 million pretax  impairment charge related to our decision to
dispose of certain  used  trailers  and a $3.1 million fuel tax refund in fiscal
2004 and a $0.9 million  pretax  write-off of loan  origination  costs in fiscal
2003. Excluding the impact of these items, which we believe to be non-recurring,
and we would  have  generated  pre-tax  income of $9.9  million  in fiscal  2004
compared  to pre-tax  income of $7.5  million in fiscal  2003.  We believe  that
excluding the impact of these items affords  investors  with a consistent  basis
for comparing our operating results from year-to-year.

Stock Issuance

     In the fourth  quarter of fiscal 2004, we issued 1.85 million shares of our
common stock in a public offering.  The stock issuance  resulted in net proceeds
to us of approximately  $25.1 million. We used the proceeds to repay all amounts
outstanding under our revolving credit facility. The balance of the net proceeds
were used to pay off debt and leases related to equipment.






                                      -14-
<PAGE>
Results of Operations

     The following  table sets forth the percentage  relationship of revenue and
expense items to operating revenue for the periods indicated.
<TABLE>
                                                                                  Fiscal year ended June 30,
                                                                                2004             2003          2002
                                                                                ----             ----          ----
<S>                                                                            <C>               <C>           <C>
Operating revenue.........................................................     100.0%            100.0%        100.0%
Operating expenses:
   Salaries, wages, and employee benefits.................................      31.3              30.4          29.8
   Fuel...................................................................      13.6              13.0          10.7
   Operations and maintenance.............................................       8.3               8.6           8.3
   Insurance and claims...................................................       4.8               3.8           3.6
   Depreciation, amortization, and impairment charges(1)..................       6.5               3.8           4.1
   Revenue equipment rentals..............................................       7.6               6.7           6.5
   Purchased transportation...............................................      19.5              23.3          26.8
   Cost of products and services sold.....................................       1.2               1.2           1.2
   Professional and consulting fees.......................................       0.6               0.7           0.5
   Communication and utilities............................................       1.0               1.1           1.2
   Operating taxes and licenses...........................................       2.1               2.0           2.0
   General and other operating ...........................................       1.7               1.9           2.2
                                                                                 ---               ---           ---

      Total operating expenses............................................      98.2              96.5          96.9
                                                                                ----              ----          ----

Operating income..........................................................       1.8               3.5           3.1
Other (income) expense:
   Interest expense, net(2)...............................................       0.9               1.7           2.2
   Other (income) expense ................................................       0.1               ---           ---
                                                                                 ---               ---           ---

Income before income taxes................................................       0.8               1.8           0.9
Provision for income taxes................................................       0.9               0.8           0.4
                                                                                 ---               ---           ---

Net income (loss).........................................................      (0.1)%             1.0%          0.5%
                                                                                ======             ====          ====
--------------------
(1)  Includes a $9.8 million trailer impairment charge or 2.5% of operating revenue in fiscal 2004.
(2)  Includes a $914,000 pretax write-off of unamortized  loan  origination  costs for refinancing our line of credit in the quarter
     ended September 30, 2002.
</TABLE>
Fiscal year ended June 30, 2004, compared with fiscal year ended June 30, 2003

     Operating  revenue  increased by $30.8 million,  or 8.4%, to $397.9 million
for fiscal  2004,  from  $367.1  million  for fiscal  2003.  This  increase  was
primarily  attributable to a 4.8% improvement in average revenue per total mile,
excluding  fuel  surcharge,  from $1.169 to $1.225,  a 2.0%  increase in average
miles per tractor per week, from 2,179 to 2,223,  and a 4.1% increase in average
tractors from 2,172 to 2,262.  The improvement in average revenue per total mile
resulted  primarily from better overall freight rates in fiscal 2004, a decrease
in  the  percentage  of  our  freight   comprised  of  automotive  parts  and  a
corresponding  increase in the  percentage of our freight  comprised of consumer
non-durables,  and  to  a  lesser  extent  a  reduction  in  our  percentage  of
non-revenue  miles.  The  increase in miles per  tractor per week was  primarily
attributable to stronger overall freight demand in the 2004 period.  Revenue per
tractor per week,  excluding  fuel  surcharge,  which is our primary  measure of
asset  productivity,  increased  7.0% to $2,723 in fiscal 2004,  from $2,546 for
fiscal 2003, as a result of increases in revenue per mile and miles per tractor.
The increase in average  tractors was primarily  related to our  acquisition  of
certain  assets of Highway  in the first  quarter of fiscal  2004.  Revenue  for
TruckersB2B was $8.1 million in fiscal 2004,  compared to $7.2 million in fiscal
2003. The TruckersB2B revenue increase resulted from an increase in member usage
of various programs, including the fuel and tire discount programs.

     Salaries,  wages,  and employee  benefits were $124.5 million,  or 31.3% of
operating  revenue,  for fiscal 2004,  compared to $111.6  million,  or 30.4% of
operating  revenue,  for fiscal 2003.  The increase in the overall dollar

                                      -15-
<PAGE>
amount primarily was related to a 16.6% increase in company miles, which in turn
increased  driver  wages.  The  0.9%  increase  in this  expense  category  as a
percentage of operating revenue was primarily attributable to an increase in the
percentage  of our fleet  comprised  of company  trucks,  an  increase in driver
compensation, and an increase in administrative payroll and related expenses for
the Highway Express employees.  We expect this line item to increase in the near
term primarily because of a driver pay increase implemented during March 2004.

     Fuel expenses  increased to $54.0 million,  or 13.6% of operating  revenue,
for fiscal 2004, compared to $47.6 million,  or 13.0% of operating revenue,  for
the same period in fiscal 2003.  This increase was primarily  attributable  to a
16.6%  increase  in company  miles and an  increase  in average  fuel  prices of
approximately  $0.06  per  gallon.  Fuel  expense  was  partially  offset by the
collection of $12.7 million in fuel surcharge revenue in the fiscal 2004 period,
compared to $9.0  million in the fiscal 2003 period.  In addition,  fuel expense
was reduced by a $3.1 million fuel tax refund relating to prior years. We expect
fuel prices may remain at relatively high levels due to low inventory and unrest
in the Middle East.  Higher fuel prices will increase our operating  expenses to
the extent we cannot offset them with surcharges.

     Operations and maintenance  expenses  increased to $33.1 million for fiscal
2004,  from $31.7  million for fiscal  2003.  This dollar  amount  increase  was
primarily the result of our larger fleet of company-operated equipment in fiscal
2004. As a percentage of operating revenue, operations and maintenance decreased
to 8.3% of revenue  for fiscal  2004,  compared  to 8.6% for  fiscal  2003.  The
decrease in  maintenance  expense as a percentage  of revenue in the fiscal 2004
period  was  primarily  the  result of our fleet  upgrade  initiative,  as newer
tractors and trailers  generally require less  maintenance,  which was partially
offset by a larger  percentage of our fleet being comprised of  company-operated
equipment  in the fiscal 2004  period.  Operations  and  maintenance  consist of
direct operating expense, maintenance and tire expense.

     Insurance  and  claims  expense  was $18.9  million,  or 4.8% of  operating
revenue,  for fiscal  2004,  compared  to $14.1  million,  or 3.8% of  operating
revenue,  for fiscal 2003.  The primary reason for the increase in insurance and
claims expense relates to one significant accident that occurred and was accrued
for in the fourth  quarter of fiscal 2004.  Our  insurance  expenses  consist of
premiums  for  liability,  physical  damage,  and cargo  damage  insurance.  Our
insurance  program  involves  self-insurance  at various risk retention  levels.
Claims in excess of these risk  levels are  covered by  insurance  in amounts we
consider to be adequate.  We accrue for the uninsured portion of claims based on
known claims and  historical  experience.  We regularly  evaluate our  insurance
program in an effort to maintain a balance  between premium expense and the risk
retention we are willing to assume.

     Depreciation  and  amortization,  consisting  primarily of  depreciation of
revenue equipment,  increased to $25.8 million, or 6.5% of operating revenue, in
fiscal 2004 from $13.8 million,  or 3.8% of operating revenue,  for fiscal 2003.
This increase was primarily attributable to the pretax impairment charge of $9.8
million,  or 2.5% of  operating  revenue  in fiscal  2004  related  to a plan to
dispose of all 48-foot  trailers in addition to 53-foot trailers over nine years
old.  We disposed of  approximately  1,600  1994-1998  model year  trailers  and
replaced them with 1,300 2004/2005 model year trailers.  We also incurred higher
depreciation due to the equipment we acquired in the Highway Express acquisition
and losses on disposition of some of the tractors acquired from Burlington Motor
Carriers.  These items were  partially  offset by our increased use of operating
leases to finance  acquisitions  of revenue  equipment.  Revenue  equipment held
under  operating  leases is not  reflected on our balance sheet and the expenses
related to such  equipment  are  reflected on our  statements  of  operations in
revenue  equipment  rentals,  rather than in depreciation  and  amortization and
interest  expense,  as is the case for revenue  equipment  that is financed with
borrowings  or capital  leases.  We expect most of the new tractors and trailers
acquired in connection with our fleet upgrade will be financed under off-balance
sheet operating  leases. In such event, we expect a decrease in depreciation and
amortization going forward, excluding the impact of the impairment charge.

     Revenue equipment rentals were $30.2 million, or 7.6% of operating revenue,
in fiscal 2004,  compared to $24.5 million,  or 6.7% of operating  revenue,  for
fiscal  2003.  This  increase was  attributable  to a higher  proportion  of our
tractor and trailer fleet held under operating leases during the 2004 period. As
we expect to finance most of our new tractors  and  trailers  under  off-balance
sheet operating  leases, we expect revenue equipment rentals will increase going
forward.

     Purchased  transportation decreased to $77.6 million, or 19.5% of operating
revenue, for fiscal 2004, from $85.5 million, or 23.3% of operating revenue, for
fiscal  2003.  This  decrease  was  primarily  related  to  reduced  independent
contractor  expense,  as the  percentage of our fleet  comprised of  independent
contractors decreased.

                                      -16-
<PAGE>
Independent  contractors  are  drivers  who cover all their  operating  expenses
(fuel,  driver salaries,  maintenance,  and equipment costs) for a fixed payment
per mile.  We expect the  majority  of our  equipment  additions  to come in our
company-operated  fleet.  As a result,  the percentage of our fleet comprised of
independent  contractors may continue to decline, with a corresponding  decrease
in this  expense  category.  It has  become  difficult  to  recruit  and  retain
independent contractors.

     All of our other  operating  expenses are relatively  minor in amount,  and
there were no significant changes in these expenses.

     Net interest expense  decreased by $2.5 million,  or 40.3%, to $3.7 million
in fiscal  2004,  or .9% of operating  revenue,  from $6.2  million,  or 1.7% of
operating  revenue,  in fiscal 2003. The decrease was the result of reduced bank
borrowings, which decreased to $6.0 million at June 30, 2004, from $23.1 million
at June 30, 2003,  reduced  capital lease  obligations,  which decreased to $5.3
million at June 30, 2004,  from $28.2  million at June 30, 2003,  and a one-time
pretax  write-off of unamortized loan  origination  costs of approximately  $0.9
million  related to the  refinancing  of our line of credit in fiscal 2003.  The
reduction  in our  capital  lease  obligations  has  resulted  largely  from our
increased  use of  operating  leases  to  finance  acquisitions  of new  revenue
equipment. The reduction in bank borrowings and other debt resulted from the use
of the  proceeds  of our  secondary  offering  completed  in May  2004  and from
increased working capital related to our increased profitability in fiscal 2004.

     Our pretax  margin,  which we believe is a useful  measure of our operating
performance because it is neutral with regard to the method of revenue equipment
financing that a company uses,  improved to 2.5% for fiscal 2004,  excluding the
impact of the $9.8 million pretax  impairment  charge, or 2.5% of pretax margin,
and a $3.1  million  fuel tax refund,  or 0.8% of pretax  margin,  from 2.0% for
fiscal 2003,  excluding the impact of a one-time pretax write-off of unamortized
loan origination costs of approximately  $0.9 million related to the refinancing
of our line of credit,  or 0.2% of pretax  margin.  In addition to other factors
described  above,   Canadian  exchange  rate  fluctuations   principally  impact
salaries,  wages,  and benefits and  purchased  transportation  and,  therefore,
impact our pretax margin and results of operations.

     Income taxes  increased $0.5 million to $3.4 million for fiscal 2004,  from
$2.9 million,  for fiscal 2003.  The effective tax rate increased as a result of
an  increase  in  non-deductible  expenses  related  to our  driver per diem pay
structure,  in addition to the tax effect of final  settlement with the Internal
Revenue Service related to all of the Company's  consolidated federal income tax
returns  through  fiscal year June 30, 2001.  As per diem charges are  partially
non-deductible  for income tax purposes,  our tax rate will fluctuate as our net
income fluctuates.

Fiscal year ended June 30, 2003, compared with fiscal year ended June 30, 2002

     Operating  revenue  increased by $30.1 million,  or 8.9%, to $367.1 million
for fiscal 2003,  from $337.0  million for fiscal 2002.  This increase  resulted
from a 3.1%  improvement  in average  revenue  per total  mile,  excluding  fuel
surcharge,  from $1.134 to $1.169, and the full year effect of tractor additions
from  the  Burlington  acquisition  made in  March  of  fiscal  2002.  Dedicated
operations  for  outsourced  spotting  services,  which  began  in  March  2002,
represented approximately $3.3 million of this increase. Revenue for TruckersB2B
was $7.2 million in fiscal 2003  compared to $6.7  million in fiscal  2002.  The
TruckersB2B revenue increase is primarily related to an increase in member usage
of various programs including the tire discount program. Revenue per tractor per
week,  excluding  fuel  surcharge,   which  is  our  primary  measure  of  asset
productivity,  remained  constant at $2,546 in fiscal 2003 compared to $2,548 in
fiscal 2002.

     Salaries,  wages and benefits  were $111.6  million,  or 30.4% of operating
revenue,  for fiscal  2003,  compared to $100.4  million,  or 29.8% of operating
revenue, for fiscal 2002. This increase is primarily related to a 16.2% increase
in company  miles,  which in turn  increased  the amount  paid to  drivers.  The
non-driver   payroll  expense  and  employer-paid   health  insurance   remained
consistent year over year despite an industry wide increase in medical expenses.

     Fuel expenses  increased to $47.6 million,  or 13.0% of operating  revenue,
for fiscal 2003  compared  to $36.0  million,  or 10.7%,  in fiscal  2002.  This
increase was primarily  attributable to a 16.2% increase in company miles and an
increase in average fuel prices of approximately  $0.17 per gallon. Fuel expense
also was partially  offset by the  collection of $9.0 million in fuel  surcharge
revenue in the fiscal 2003  period,  compared to $2.8 million in the fiscal 2002
period.  We expect fuel prices may remain at  relatively  high levels due to low
inventory  and unrest

                                      -17-
<PAGE>
in the Middle East.  Higher fuel prices will increase our operating  expenses to
the extent we cannot offset them with surcharges.

     Operations and maintenance increased to $31.7 million, or 8.6% of operating
revenue,  for fiscal  2003,  compared  to $28.1  million,  or 8.3% of  operating
revenue, in fiscal 2002.  Maintenance  expenses increased in fiscal 2003, as the
average age of our  tractors  increased to 2.7 years from 2.3 years and trailers
increased  to 6.1  years  from  4.9  years.  As the  age  of our  equipment  has
increased,  the  cost to  maintain  the  fleet  has  increased.  Operations  and
maintenance consist of direct operating expense, maintenance and tire expense.

     Insurance  and  claims  expense  was $14.1  million,  or 3.8% of  operating
revenue,  for fiscal  2003,  compared  to $12.0  million,  or 3.6% of  operating
revenue,  for fiscal 2002.  Our insurance  program  involves  self-insurance  at
various risk retention levels. Claims in excess of these risk levels are covered
by insurance in amounts we consider to be adequate.  We accrue for the uninsured
portion of claims based on known claims and historical experience.  We regularly
evaluate  our  insurance  program  in an effort to  maintain  a balance  between
premium expense and the risk retention we are willing to assume.

     Depreciation  and  amortization,  consisting  primarily of  depreciation of
revenue equipment, increased slightly to $13.8 million in fiscal 2003 from $13.7
million for fiscal 2002. As a percentage of operating revenue,  depreciation and
amortization decreased slightly to 3.8% of operating revenue in fiscal 2003 from
4.1% of  operating  revenue in fiscal  2002,  as we moved to  financing  revenue
equipment  under  operating  leases.  As such,  this  revenue  equipment  is not
reflected on our balance  sheet and the expenses  related to such  equipment are
reflected on our statements of operations in revenue equipment  rentals,  rather
than in depreciation and amortization and interest  expense,  as is the case for
revenue  equipment that is financed with borrowings or capital leases. We expect
most of the new  tractors  and trailers  acquired in  connection  with our fleet
upgrade will be financed under off-balance sheet operating leases.

     Revenue equipment rentals were $24.5 million, or 6.7% of operating revenue,
in fiscal 2003,  compared to $21.8 million,  or 6.5% of operating  revenue,  for
fiscal  2002.  This  increase was  attributable  to a higher  proportion  of our
tractor and trailer fleet held under operating  leases during fiscal 2003. As we
expect to finance most of our new tractors and trailers under  off-balance sheet
operating  leases,  we expect  revenue  equipment  rentals will  increase  going
forward.

     Purchased  transportation decreased to $85.5 million, or 23.3% of operating
revenue, for fiscal 2003, from $90.3 million, or 26.8% of operating revenue, for
fiscal  2002.  This  decrease  was  primarily  related  to  reduced  independent
contractor  expense,  as the  percentage of our fleet  comprised of  independent
contractors decreased.  Independent  contractors are drivers who cover all their
operating expenses (fuel, driver salaries, maintenance, and equipment costs) for
a fixed payment per mile.  We expect the majority of our equipment  additions to
come in our  company-operated  fleet.  As a result,  the percentage of our fleet
comprised  of  independent   contractors   may  continue  to  decline,   with  a
corresponding  decrease in this  expense  category.  It has become  difficult to
recruit and train independent contractors.

     All of our other  operating  expenses are relatively  minor in amount,  and
there were no significant changes in these expenses.

     Net interest expense  decreased by $1.3 million,  or 17.3%, to $6.2 million
in fiscal 2003, or 1.7% of operating revenue,  from $7.5 million in fiscal 2002,
or 2.2% of operating  revenue.  The  decrease  was the result of lower  interest
rates and reduced  bank  borrowings,  offset by a one-time  pretax  write-off of
unamortized loan origination costs of approximately  $0.9 million related to our
line of credit in fiscal 2003.  Interest rates decreased 0.9% year-over-year and
bank  borrowings  decreased to $23.1  million for fiscal 2003 from $38.9 million
for fiscal 2002.

     Other income and expense includes  approximately $1.1 million of commission
income related to a receivables  collection  agreement  between Foothill Capital
and us. This  agreement  related to the  collection of  receivables  tied to the
bankrupt Burlington Motor Carriers' business.  We have recognized  approximately
$1.0  million of other  expense  related to a  write-down  of revenue  equipment
acquired from Foothill Capital, which has not been located.

                                      -18-
<PAGE>
     Our pretax  margin,  which we believe is a useful  measure of our operating
performance because it is neutral with regard to the method of revenue equipment
financing  that a company  uses,  improved  to 2.0%,  excluding  the impact of a
one-time pretax write-off of unamortized loan origination costs of approximately
$0.9 million  related to the  refinancing  of our line of credit in fiscal 2003,
from 0.9% in fiscal 2002.

     Income taxes increased by $1.7 million to $2.9 million for fiscal 2003 from
$1.2 million for fiscal 2002. The effective tax rate increased as a result of an
increase in non-deductible expenses related to our driver per diem pay structure
and the tax effect on the trailer impairment.  As per diem charges are partially
non-deductible  for income tax purposes,  our tax rate will fluctuate as our net
income fluctuates.

Liquidity and Capital Resources

     Trucking  is a  capital-intensive  business.  We  require  cash to fund our
operating expenses (other than depreciation and  amortization),  to make capital
expenditures  and  acquisitions,  and to repay  debt,  including  principal  and
interest payments.  Other than ordinary operating  expenses,  we anticipate that
capital  expenditures  for the acquisition of revenue  equipment will constitute
our primary cash requirement over the next twelve months.  Our principal sources
of liquidity are cash generated from operations,  bank  borrowings,  capital and
operating lease financing of revenue  equipment,  proceeds from the sale of used
revenue  equipment,  and to a lesser extent,  the proceeds from our recent stock
issuance.

     We generated net cash from operating  activities of $33.1 million in fiscal
2004,  $33.7 million in fiscal 2003, and $14.5 million in fiscal 2002. In fiscal
2004,  cash flow remained  relatively  constant  compared to fiscal 2003 with an
increase in trade receivables offset by an increase in accounts payable.

     Net cash used in  investing  activities  was $4.6  million for fiscal 2004,
compared to net cash provided by investing activities of $3.2 million for fiscal
2003 and $5.3  million for fiscal 2002.  Approximately  $3.6 million of the cash
used in  investing  activities  for fiscal 2004 was  related to our  purchase of
certain assets of Highway  Express in August of 2003. In addition,  cash used in
(provided by) investing  activities includes the net cash effect of acquisitions
and  dispositions of revenue  equipment during each year.  Capital  expenditures
(including  the value of equipment  procured  under capital leases and excluding
the assets purchased from Highway Express) totaled $25.1 million in fiscal 2004,
$7.1  million in fiscal  2003,  and $19.0 million in fiscal  2002.  We generated
proceeds  from the sale of property  and  equipment  of $22.8  million in fiscal
2004, $10.3 million in fiscal 2003, and $11.7 million in fiscal 2002.

     Net cash used in  financing  activities  was $29.2  million in fiscal 2004,
$36.2  million  in fiscal  2003,  and $20.2  million in fiscal  2002.  Financing
activity  represents  bank borrowings  (new  borrowings,  net of repayments) and
payment of the principal component of capital lease obligations.

     As of June 30,  2004,  we had on order 407  tractors  and 600  trailers for
delivery through June 2005.  These revenue  equipment orders represent a capital
commitment of approximately  $45.6 million,  before  considering the proceeds of
equipment  dispositions.  In connection with our fleet upgrade, we have financed
most of the new  tractors  and new  trailers  we  have  acquired  to date  under
off-balance  sheet  operating  leases.  A portion of the used equipment that has
been or will be  replaced  by these  new  units  was or is  owned or held  under
capital leases and, therefore,  carried on our balance sheet. As a result of our
increased use of operating leases to finance  acquisitions of revenue equipment,
we have  reduced our balance  sheet debt.  At June 30, 2004,  our total  balance
sheet debt,  including  capital lease  obligations and current  maturities,  was
$14.5 million,  compared to $60.8 million at June 30, 2003, and $97.0 million at
June 30, 2002. Our  debt-to-capitalization  ratio (total balance sheet debt as a
percentage  of  total  balance  sheet  debt  plus  total  stockholders'  equity)
decreased to 14.9% at June 30, 2004,  from 51.5% at June 30, 2003,  and 64.3% at
June 30, 2002.

     Over the past several years,  we have financed most of our new tractors and
trailers under operating  leases,  which are not reflected on our balance sheet.
The use of operating leases also affects our statement of cash flows. For assets
subject to these operating leases, we do not record  depreciation as an increase
to net cash provided by  operations,  nor do we record any entry with respect to
investing activities or financing activities.

     Our operating leases include some under which we do not guarantee the value
of the asset at the end of the lease term  ("walk-away  leases")  and some under
which we do  guarantee  the value of the asset at the end of the lease term.  We
were obligated for residual value payments  related to operating leases of $42.5
million at June 30, 2004

                                      -19-
<PAGE>
and $51.1  million at June 30,  2003.  A portion of these  amounts is covered by
repurchase and/or trade agreements we have with the equipment  manufacturer.  We
believe  that any  residual  payment  obligations  that are not  covered  by the
manufacturer  will be satisfied,  in the aggregate,  by the value of the related
equipment at the end of the lease. We anticipate that our continued  reliance on
operating leases,  rather than bank borrowings or capital leases, to finance the
acquisition of revenue equipment in connection with our fleet upgrade will allow
us to use our cash flows to further reduce our balance sheet debt.

     The  tractors  on order  are not  protected  by  manufacturers'  repurchase
arrangements and are not subject to "walk-away" leases under which we can return
the equipment  without  liability  regardless of its market value at the time of
return. Therefore, we are subject to the risk that equipment values may decline,
in which case we would  suffer a loss upon  disposition  and be required to make
cash  payments  because  of the  residual  value  guarantees  we  provide to our
equipment lessors.

     On September 26, 2002, we entered into our current  primary credit facility
with Fleet Capital  Corporation,  Fleet Capital Canada  Corporation  and several
other  lenders.   This  $55.0  million  facility   consists  of  revolving  loan
facilities,  approximately  $10.8  million  in term  loan  subfacilities,  and a
commitment  to issue and  guaranty  letters of credit.  Repayment of the amounts
outstanding  under the  credit  facility  is  secured  by a lien on our  assets,
including  the stock or other  equity  interests  of our  subsidiaries,  and the
assets of certain of our subsidiaries.  In addition, certain of our subsidiaries
that are not party to the  credit  facility  have  guaranteed  repayment  of the
amount  outstanding  under the credit  facility and have granted a lien on their
respective  assets to secure  such  repayment.  The credit  facility  expires on
September 26, 2005.

     Amounts  available  under the credit  facility are determined  based on our
accounts receivable borrowing base. The facility contains restrictive covenants,
which,  among other  things,  limit our ability to pay cash  dividends  and make
capital  expenditures and lease payments,  and require us to maintain compliance
with certain financial ratios,  including a minimum fixed charge coverage ratio.
We were in  compliance  with these  covenants  at June 30,  2004,  and expect to
remain in compliance for the foreseeable  future. At June 30, 2004, $6.0 million
of our credit  facility was utilized as outstanding  borrowings and $6.8 million
was  utilized  for standby  letters of credit,  and we had  approximately  $37.4
million in remaining availability under the facility.

     We believe we will be able to fund our operating  expenses,  as well as our
current  commitments for the acquisition of revenue equipment in connection with
our fleet  upgrade,  over the next  twelve  months  with a  combination  of cash
generated  from  operations,  borrowings  available  under  our  primary  credit
facility,  and  lease  financing  arrangements.  Our  reduction  in  outstanding
indebtedness  with the  application  of the net  proceeds  of our  recent  stock
offering  significantly  increased  the  availability  under our primary  credit
facility for working capital and other purposes.  Subject to any required lender
approval,  we may  make  acquisitions,  although  we do not  have  any  specific
acquisition plans at this time.

     We will continue to have  significant  capital  requirements  over the long
term, and the  availability of the needed capital will depend upon our financial
condition  and operating  results and numerous  other factors over which we have
limited or no control,  including  prevailing  market  conditions and the market
price of our common stock.  However,  based on our improving  operating results,
anticipated future cash flows,  current  availability under our credit facility,
as well  as  increased  borrowing  availability  following  the  application  of
offering proceeds,  and sources of equipment lease financing that we expect will
be  available  to us,  we do not  expect  to  experience  significant  liquidity
constraints in the foreseeable future.





                                      -20-
<PAGE>

     As of June 30, 2004, our bank loans,  capitalized leases, operating leases,
other debts,  and future  commitments  have stated  maturities or minimum annual
payments as follows:
<TABLE>
                                                                 Annual Cash Requirements
                                                                    as of June 30, 2004
                                                                      (in thousands)
                                                                   Amounts Due by Period
                                                                          One to         Three       Over
                                                           Less than       Three       to Five       Five
                                                Total       One Year       Years         Years       Years
                                              -----------   ---------    ---------     ----------  ---------
<S>                                           <C>           <C>          <C>           <C>         <C>
Operating leases (1).........................   $159,949     $37,298      $67,082       $27,106     $28,463
Capital lease obligations(1).................      5,317       3,040        1,449           225         603
Long-term debt...............................      9,177       2,270        4,703           319       1,885
                                              -----------   ---------    ---------     ----------  ---------

Sub-total....................................    174,443      42,608       73,234        27,650      30,951

Future purchase of revenue equipment.........     45,555       3,477       13,908        21,919       6,251
Employment and consulting agreements(2)......      1,430         958          453            19         ---
Standby letters of credit....................      6,766       6,766          ---           ---         ---
                                              -----------   ---------    ---------     ----------  ---------

Total........................................   $228,194     $53,809      $87,595       $49,588     $37,202
                                              ===========   =========    =========     ==========  =========
---------------------
(1)  Included in these balances are residual guarantees of $42.5 million in total and $6.0 million coming due in less than one year.
     We believe these amounts will be satisfied by manufacturer commitments.
(2)  The amounts  reflected in the table do not include  amounts that could become  payable to our Chief  Executive  Officer,  Chief
     Financial  Officer,  and our  Executive  Vice  President  under  certain  circumstances  if their  employment by the Company is
     terminated.
</TABLE>
Off-Balance Sheet Arrangements

     Operating leases have been an important source of financing for our revenue
equipment. We lease a significant portion of our tractor and trailer fleet using
operating leases. In connection with  substantially all of our operating leases,
we have  issued  residual  value  guarantees,  which  provide  that if we do not
purchase the leased equipment from the lessor at the end of the lease term, then
we are liable to the lessor for an amount equal to the shortage (if any) between
the proceeds from the sale of the equipment and an agreed value. With respect to
a  substantial  majority  of our  tractors  and a  significant  minority  of our
trailers held under operating  leases,  we have obtained from the  manufacturers
residual value guarantees that meet or exceed the amount of our guarantee to the
lessor.  To the extent the expected value at the lease termination date is lower
than the residual value  guarantee,  we would accrue for the difference over the
remaining  lease term.  We  currently  believe  that  proceeds  from the sale of
equipment  held under  operating  leases would exceed the amount of our residual
obligation on all operating leases.

Inflation

     Many of our operating expenses, including fuel costs and revenue equipment,
are  sensitive to the effects of  inflation,  which  result in higher  operating
costs and reduced  operating  income.  The effects of  inflation on our business
during the past three years were most  significant  in fuel. We have limited the
effects of inflation through increases in freight rates and fuel surcharges.

Critical Accounting Policies

     The  preparation of our financial  statements in conformity with accounting
principles generally accepted in the United States requires us to make estimates
and assumptions that impact the amounts  reported in our consolidated  financial
statements and accompanying  notes.  Therefore,  the reported amounts of assets,
liabilities,  revenues, expenses and associated disclosures of contingent assets
and  liabilities are affected by these  estimates and  assumptions.  We evaluate
these  estimates  and  assumptions  on an ongoing  basis,  utilizing  historical
experience,  consultation with experts, and other methods considered  reasonable
in  the  particular  circumstances.  Nevertheless,

                                      -21
<PAGE>
actual results may differ significantly from our estimates and assumptions,  and
it is  possible  that  materially  different  amounts  would be  reported  using
differing estimates or assumptions. We consider our critical accounting policies
to be those that require us to make more  significant  judgments  and  estimates
when we prepare our  financial  statements.  Our  critical  accounting  policies
include the following:

     Revenue  Recognition.  Upon  delivery of a load,  we recognize  all revenue
related to that load,  including  revenue  from  detention  charges and our fuel
surcharge  program.  In  this  connection,  we  make  estimates  concerning  the
collectibility  of our accounts  receivable and the required amounts of reserves
for uncollectible accounts. We also recognize direct operating expenses, such as
drivers' wages and fuel, on the date of delivery of the relevant load.

     Depreciation  of Property and  Equipment.  We  depreciate  our property and
equipment  using the straight line method over the estimated  useful life of the
asset. We generally use estimated useful lives of 4 to 12 years for tractors and
trailers, and estimated salvage values for tractors and trailers generally range
from 25% to 40% of the  capitalized  cost.  Gains and losses on the  disposal of
revenue  equipment  are included in  depreciation  expense in our  statements of
operations.

     We periodically review the reasonableness of our estimates regarding useful
lives and salvage values of our revenue  equipment and other  long-lived  assets
based upon, among other things,  our experience with similar assets,  conditions
in the used equipment market, and prevailing  industry practice.  Changes in our
useful life or salvage value  estimates,  or  fluctuations in market values that
are not reflected in our estimates,  could have a material effect on our results
of operations.

     Revenue  equipment and other  long-lived  assets are tested for  impairment
whenever an event occurs that indicates an impairment may exist. Expected future
cash flows are used to analyze whether an impairment has occurred. If the sum of
expected  undiscounted  cash  flows  is less  than  the  carrying  value  of the
long-lived  asset,  then  an  impairment  loss is  recognized.  We  measure  the
impairment  loss by comparing the fair value of the asset to its carrying value.
Fair  value is  determined  based on a  discounted  cash  flow  analysis  or the
appraised or estimated market value of the asset, as appropriate.

     Operating  leases.  We  recently  have  financed a majority  of our revenue
equipment  acquisitions with operating leases,  rather than with bank borrowings
or capital lease  arrangements.  These leases  generally  contain residual value
guarantees,  which provide that the value of equipment returned to the Lessor at
the end of the lease  term will be no lower  than a  negotiated  amount.  To the
extent that the value of the equipment is below the  negotiated  amount,  we are
liable to the Lessor  for the  shortage  at the  expiration  of the  lease.  For
approximately  81% of our current tractors and 61% of our current  trailers,  we
have residual  value  guarantees at amounts equal to our residual  obligation to
the  lessors.  For  all  other  equipment  (or  to the  extent  we  believe  any
manufacturer  will refuse or be unable to meet its obligation),  we are required
to recognize  additional rental expense to the extent we believe the fair market
value at the lease termination will be less than our obligation to the lessor.

     In accordance with SFAS 13, "Accounting for Leases," property and equipment
held under operating leases, and liabilities related thereto,  are not reflected
on our balance sheet. All expenses related to revenue equipment operating leases
are reflected on our statements of operations in the line item entitled "Revenue
equipment  rentals." As such,  financing revenue equipment with operating leases
instead of bank  borrowings  or capital  leases  effectively  moves the interest
component of the financing arrangement into operating expenses on our statements
of operations. Consequently, we believe that pretax margin (income before income
taxes as a percentage of operating revenue) may provide a more useful measure of
our  operating  performance  than  operating  ratio  (operating  expenses  as  a
percentage of operating  revenue)  because it  eliminates  the impact of revenue
equipment financing decisions.

     Claims Reserves and Estimates. The primary claims arising for us consist of
cargo liability,  personal injury, property damage, collision and comprehensive,
workers' compensation, and employee medical expenses. We maintain self-insurance
levels for these  various areas of risk and have  established  reserves to cover
these self-insured liabilities.  We also maintain insurance to cover liabilities
in excess of these  self-insurance  amounts.  Claims reserves represent accruals
for the  estimated  uninsured  portion of  reported  claims,  including  adverse
development  of  reported  claims,  as well as  estimates  of  incurred  but not
reported  claims.  Reported  claims and related loss  reserves are  estimated by
third party administrators,  and we refer to these estimates in establishing our
reserves. Claims incurred but not reported are estimated based on our historical
experience and industry trends,  which are continually

-22-
<PAGE>
monitored,  and  accruals are  adjusted  when  warranted by changes in facts and
circumstances.  In  establishing  our  reserves  we must take into  account  and
estimate various factors,  including, but not limited to, assumptions concerning
the nature and  severity  of the claim,  the effect of the  jurisdiction  on any
award or  settlement,  the length of time until ultimate  resolution,  inflation
rates in health care and in general,  interest rates, legal expenses,  and other
factors.  Our actual  experience may be different than our estimates,  sometimes
significantly.  Changes in assumptions  as well as changes in actual  experience
could cause these  estimates  to change in the near term.  Insurance  and claims
expense will vary from period to period  based on the severity and  frequency of
claims incurred in a given period.

     Goodwill.  Our  consolidated  balance sheets at June 30, 2004, and June 30,
2003,  included goodwill of acquired  businesses of approximately $16.7 million.
This  amount  has been  recorded  as a result  of  prior  business  acquisitions
accounted for under the purchase  method of  accounting.  Prior to July 1, 2001,
goodwill from each acquisition was generally amortized on a straight-line basis.
Under FASB No. 142, Goodwill and Other Intangible Assets, which we adopted as of
July 1, 2001,  goodwill is tested for impairment  annually (or more often, if an
event or  circumstance  indicates that an impairment  loss has been incurred) in
lieu of amortization.  The provisions of FASB No. 142 required the completion of
a transitional  impairment test within six months of adoption. We completed this
transitional  test and there was no  impairment  as of July 1, 2001.  During the
fourth  quarter of fiscal 2004, we completed  our most recent annual  impairment
test  for that  fiscal  year and  concluded  that  there  was no  indication  of
impairment.

     A  significant  amount of  judgment  is  required  in  performing  goodwill
impairment tests. Such tests include  estimating the fair value of our reporting
units.  As required by FASB No. 142, we compare the estimated  fair value of our
reporting units with their respective  carrying amounts including  goodwill.  We
define a reporting unit as an operating segment.  Under FASB No. 142, fair value
refers to the  amount  for which the  entire  reporting  unit could be bought or
sold.  Our  methods  for   estimating   reporting  unit  values  include  market
quotations,  asset and liability fair values,  and other  valuation  techniques,
such as  discounted  cash flows and  multiples  of earnings,  revenue,  or other
financial  measures.  With the  exception  of  market  quotations,  all of these
methods involve  significant  estimates and assumptions,  including estimates of
future financial performance and the selection of appropriate discount rates and
valuation multiples.

     Accounting for Income Taxes.  Deferred income taxes represent a substantial
liability  on  our  consolidated  balance  sheet.   Deferred  income  taxes  are
determined  in  accordance  with SFAS No. 109,  "Accounting  for Income  Taxes."
Deferred tax assets and  liabilities  are recognized for the expected future tax
consequences   attributable  to  differences  between  the  financial  statement
carrying  amounts of existing assets and  liabilities  and their  respective tax
bases,  and operating  loss and tax credit  carry-forwards.  We evaluate our tax
assets  and  liabilities  on a  periodic  basis and  adjust  these  balances  as
appropriate.  We believe  that we have  adequately  provided  for our future tax
consequences  based upon current  facts and  circumstances  and current tax law.
However,  should our tax  positions be  challenged  and not  prevail,  different
outcomes could result and have a significant  impact on the amounts  reported in
our consolidated financial statements.

     The carrying value of our deferred tax assets (tax benefits  expected to be
realized  in the  future)  assumes  that we will be able to  generate,  based on
certain  estimates and assumptions,  sufficient future taxable income in certain
tax jurisdictions to utilize these deferred tax benefits. If these estimates and
related assumptions change in the future, we may be required to reduce the value
of the  deferred  tax assets  resulting in  additional  income tax  expense.  We
believe  that it is more likely than not that the  deferred  tax assets,  net of
valuation  allowance,  will be realized,  based on forecasted  income.  However,
there can be no assurance that we will meet our forecasts of future  income.  We
evaluate  the  deferred  tax assets on a periodic  basis and assess the need for
additional valuation allowances.

     Federal  income taxes are provided on that portion of the income of foreign
subsidiaries that is expected to be remitted to the United States.

                                      -23-

<PAGE>
Factors That May Affect Future Results

     Our  business  is  subject  to a number  of known  and  unknown  risks  and
uncertainties  that  may  have a  materially  adverse  effect  on our  financial
condition or operating results, many of which are beyond our control.

     Important  factors  currently known to us that could  adversely  affect our
financial  condition or operating results are summarized in Exhibit 99.1 to this
report  and  discussed  in more  detail in the  "Risk  Factors"  section  of our
Registration Statement on Form S-3 filed with the SEC on May 19, 2004.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

     We experience  various market risks,  including  changes in interest rates,
foreign  currency  exchange  rates,  and  fuel  prices.  We do  not  enter  into
derivatives or other financial  instruments for trading or speculative purposes,
nor when there are no underlying related exposures.

     Interest Rate Risk. We are exposed to interest rate risk  principally  from
our primary credit  facility.  The credit  facility  carries a maximum  variable
interest  rate of either the bank's  base rate plus 3.0% or LIBOR plus 3.5%.  At
June 30,  2004,  the interest  rate for  revolving  borrowings  under our credit
facility was LIBOR plus 2.25%. At June 30, 2004, we had $6.0 million in variable
rate term  loan  borrowings  outstanding  under the  credit  facility.  Assuming
variable rate borrowings  under the credit facility at June 30, 2004  levels, a
hypothetical 10% increase in the bank's base rate and LIBOR would reduce our net
income by approximately $43,000.

     Foreign  Currency  Exchange Rate Risk.  We are subject to foreign  currency
exchange rate risk,  specifically  in connection  with our Canadian  operations.
While  virtually all of the expenses  associated  with our Canadian  operations,
such  as  independent   contractor  costs,  company  driver  compensation,   and
administrative costs, are paid in Canadian dollars, a significant portion of our
revenue  generated from those  operations is billed in U.S. dollars because many
of our customers are U.S.  shippers  transporting  goods to or from Canada. As a
result,  increases in the Canadian  dollar  exchange rate  adversely  affect the
profitability of our Canadian operations.  Assuming revenue and expenses for our
Canadian operations  identical to the year ended June 30, 2004 (both in terms of
amount and  currency  mix),  we estimate  that a $0.01  increase in the Canadian
dollar  exchange  rate would  reduce  our  annual  net  income by  approximately
$350,000.  In response to the increase in Canadian  dollar  exchange  rates,  we
entered into derivative financial instruments to reduce our exposure to currency
fluctuations. In June 1998, the FASB issued SFAS 133, "Accounting for Derivative
Instruments and Certain Hedging  Activities." In June 2000, the FASB issued SFAS
138,  "Accounting  for  Certain  Derivative   Instruments  and  Certain  Hedging
Activity,  an  Amendment  of SFAS 133." SFAS 133 and SFAS 138  require  that all
derivative instruments be recorded on the balance sheet at their respective fair
values.  Derivatives  that are not hedges must be adjusted to fair value through
earnings.  As of June 30, 2004,  we had 92% of our estimated  Canadian  currency
exposure hedged through August 2004.  These derivative  contracts  resulted in a
$107,000 expense for the year ended June 30, 2004.

     We generally do not face the same  magnitude of foreign  currency  exchange
rate risk in connection with our intra-Mexico  operations  conducted through our
Mexican subsidiary,  Jaguar, because our foreign currency revenues are generally
proportionate  to our  foreign  currency  expenses  for  those  operations.  For
purposes  of  consolidation,  however,  the  operating  results  earned  by  our
subsidiaries,  including Jaguar, in foreign currencies are converted into United
States dollars.  As a result,  a decrease in the value of the Mexican peso could
adversely  affect our consolidated  results of operations.  Assuming revenue and
expenses  for our Mexican  operations  identical to the year ended June 30, 2004
(both in terms of amount and currency mix), we estimate that a $0.01 decrease in
the  Mexican  peso   exchange  rate  would  reduce  our  annual  net  income  by
approximately $65,000.

     Commodity Price Risk.  Shortages of fuel, increases in prices, or rationing
of petroleum products can have a materially adverse effect on our operations and
profitability.  Fuel is subject to economic,  political and market  factors that
are outside of our control. Historically, we have sought to recover a portion of
short-term  increases in fuel prices from  customers  through the  collection of
fuel surcharges.  However,  fuel surcharges do not always fully offset increases
in fuel prices.  In addition,  from  time-to-time  we may enter into  derivative
financial  instruments  to reduce our  exposure to fuel price  fluctuations.  In
accordance  with SFAS 133, we adjust any  derivative  instruments  to fair value
through  earnings on a monthly  basis.  As of June 30, 2004,  we had none of our
estimated fuel purchases hedged.  Derivative contracts had no material impact on
our results of operations for the year ended June 30, 2004.

                                      -24-

<PAGE>
Item 8.  Financial Statements and Supplementary Data

     The following statements are filed with this report:

     Report of Independent Registered Public Accounting Firm;
     Consolidated Balance Sheets as of June 30, 2004 and 2003;
     Consolidated Statements of Operations for years ended June 30, 2004,
     2003, and 2002;
     Consolidated Statements of Cash Flows for years ended June 30, 2004, 2003,
     and 2002;
     Consolidated Statements of Stockholders' Equity for years ended June 30,
     2004, 2003, and 2002; and
     Notes to Consolidated Financial Statements.





                                      -25-
<PAGE>



                               CELADON GROUP, INC.


                        CONSOLIDATED FINANCIAL STATEMENTS


                      Three years ended June 30, 2004 with
                         Report of Independent Auditors





                                    Contents

<TABLE>
<S>                                                                                                <C>
Report of Independent Registered Public Accounting Firm..........................................  27

Audited Consolidated Financial Statements:

     Consolidated Balance Sheets as of June 30, 2004 and 2003....................................  28
     Consolidated Statements of Operations for years ended
         June 30, 2004, 2003, and 2002...........................................................  29
     Consolidated Statements of Cash Flows for years ended
         June 30, 2004, 2003, and 2002...........................................................  30
     Consolidated Statements of Stockholders' Equity for years ended
         June 30, 2004, 2003, and 2002...........................................................  31
     Notes to Consolidated Financial Statements..................................................  32


</TABLE>






                                      -26-

<PAGE>


             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



The Board of Directors and Stockholders of Celadon Group, Inc.


     We have audited the  accompanying  consolidated  balance  sheets of Celadon
Group,  Inc.  as of  June  30,  2004  and  2003,  and the  related  consolidated
statements of  operations,  stockholders'  equity and cash flows for each of the
three years in the period  ended June 30,  2004.  Our audits also  included  the
financial  statement  schedule  listed in the Index at Item 15. These  financial
statements and schedule are the responsibility of the Company's management.  Our
responsibility  is to  express  an opinion  on these  financial  statements  and
schedule based on our audits.

     We  conducted  our audits in  accordance  with the  standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain  reasonable  assurance about whether the
financial  statements  are free of  material  misstatement.  An  audit  includes
examining,  on a test basis,  evidence supporting the amounts and disclosures in
the  financial  statements.  An audit also  includes  assessing  the  accounting
principles  used  and  significant  estimates  made  by  management,  as well as
evaluating the overall  financial  statement  presentation.  We believe that our
audits provide a reasonable basis for our opinion.

     In our opinion,  the consolidated  financial  statements  referred to above
present fairly, in all material respects, the consolidated financial position of
Celadon Group,  Inc. at June 30, 2004 and 2003, and the consolidated  results of
its  operations  and its cash  flows for each of the three  years in the  period
ended June 30, 2004, in conformity with accounting principles generally accepted
in the United States.  Also, in our opinion,  the related  financial  statements
schedule,  when considered in relation to the basic financial statement taken as
a whole,  presents  fairly in all material  respects the  information  set forth
therein.



                  /s/ERNST & YOUNG LLP


Indianapolis, Indiana
July 29, 2004













                                      -27-
<PAGE>
                               CELADON GROUP, INC.
                           CONSOLIDATED BALANCE SHEETS
                             June 30, 2004 and 2003
                             (Dollars in thousands)
<TABLE>
A S S E T S                                                                           2004             2003
                                                                                  -----------     ------------
<S>                                                                               <C>             <C>
Current assets:
    Cash and cash equivalents..................................................   $       356      $     1,088
    Trade receivables, net of allowance for doubtful accounts of
        $1,945 and $1,065 in 2004 and 2003, respectively.......................        52,248           44,182
    Accounts receivable -other.................................................         4,476            3,432
    Prepaid expenses and other current assets..................................         5,427            7,101
    Tires in service...........................................................         4,368            4,714
    Income tax receivable......................................................           ---              ---
    Deferred income taxes......................................................         1,974            2,296
                                                                                  -----------     ------------
        Total current assets...................................................        68,849           62,813
Property and equipment.........................................................       102,084          129,319
    Less accumulated depreciation and amortization                                     40,283           52,352
                                                                                  -----------     ------------
        Net property and equipment.............................................        61,801           76,967
Tires in service...............................................................         1,875            2,207
Goodwill ......................................................................        16,702           16,702
Other assets...................................................................         2,083            3,384
                                                                                  -----------     ------------
        Total assets...........................................................   $   151,310      $   162,073
                                                                                  ===========     ============

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...........................................................   $     7,464      $     4,204
    Accrued salaries and benefits..............................................         9,229            6,748
    Accrued insurance and claims...............................................         7,563            5,163
    Accrued independent contractor expense.....................................         2,269            2,728
    Accrued fuel expense.......................................................         2,466            3,138
    Other accrued expenses.....................................................        11,499           11,074
    Current maturities of long-term debt.......................................         2,270            6,156
    Current maturities of capital lease obligations............................         3,040           14,960
    Income tax payable.........................................................         2,941              299
                                                                                  -----------     ------------
        Total current liabilities..............................................        48,741           54,470
Long-term debt, net of current maturities......................................         6,907           26,406
Capital lease obligations, net of current maturities...........................         2,277           13,272
Deferred income taxes..........................................................        10,530           10,648
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 12,000,000 shares issued
        9,748,970 and 7,789,764 shares at June 30, 2004 and 2003,respectively..           322              257
      Additional paid-in capital...............................................        86,588           60,092
      Retained deficit.........................................................        (1,036)            (761)
      Unearned compensation on restricted stock................................          (689)             ---
      Accumulated other comprehensive loss.....................................        (2,355)          (1,947)
      Treasury stock, at cost, 96,001 shares at June 30, 2003...................          ---             (389)
                                                                                  -----------     ------------
        Total stockholders' equity.............................................        82,830           57,252
                                                                                  -----------     ------------
        Total liabilities and stockholders' equity.............................   $   151,310      $   162,073
                                                                                  ===========     ============
</TABLE>
          See accompanying notes to consolidated financial statements.

                                      -28-
<PAGE>
                               CELADON GROUP, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                    Years ended June 30, 2004, 2003 and 2002
                  (Dollars in thousands, except share amounts)
<TABLE>
                                                                               2004            2003           2002
                                                                            ----------     -----------     ----------
<S>                                                                           <C>             <C>            <C>
Operating revenue.......................................................      $397,923        $367,105       $336,999

Operating expenses:
    Salaries, wages and employee benefits...............................       124,532         111,588        100,373
    Fuel................................................................        54,019          47,592         36,047
    Operations and maintenance..........................................        33,081          31,703         28,088
    Insurance and claims................................................        18,919          14,100         12,032
    Depreciation, amortization and impairment charge(1).................        25,779          13,818         13,690
    Revenue equipment rentals...........................................        30,244          24,516         21,843
    Purchased transportation............................................        77,617          85,545         90,301
    Cost of products and services sold..................................         5,022           4,545          4,062
    Professional and consulting fees....................................         2,366           2,515          1,663
    Communications and utilities........................................         4,226           4,160          3,903
    Operating taxes and licenses........................................         8,182           7,484          6,821
    General and other operating ........................................         6,865           6,805          7,631
                                                                            ----------     -----------     ----------
        Total operating expenses........................................       390,852         354,371        326,454

Operating income........................................................         7,071          12,734         10,545

Other (income) expense:
    Interest income.....................................................           (40)            (85)          (114)
    Interest expense....................................................         3,763           6,286          7,601
    Other (income) expense, net.........................................           180              (3)           134
                                                                            ----------     -----------     ----------
Income before income taxes..............................................         3,168           6,536          2,924
Provision for income taxes..............................................         3,443           2,948          1,215
                                                                            ----------     -----------     ----------
        Net income (loss)...............................................      $   (275)       $  3,588       $  1,709
                                                                            ==========     ===========     ==========

Earnings (loss) per common share:
        Diluted earnings (loss) per share...............................      $  (0.03)       $   0.45       $   0.22
        Basic earnings (loss) per share.................................      $  (0.03)       $   0.47       $   0.22
Average shares outstanding:
        Diluted.........................................................         7,986           8,035          7,753
        Basic...........................................................         7,986           7,688          7,611

---------------------
(1) Includes a $9.8 million trailer impairment charge in 2004.
</TABLE>
          See accompanying notes to consolidated financial statements.

-29-
<PAGE>
                               CELADON GROUP, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                    Years ended June 30, 2004, 2003 and 2002
                             (Dollars in thousands)
<TABLE>
                                                                                 2004          2003         2002
                                                                              ----------    ----------   ----------
<S>                                                                           <C>           <C>           <C>
Cash flows from operating activities:
    Net income (loss)...................................................      $     (275)   $    3,588    $   1,709
Adjustments to reconcile net income (loss) to net cash provided
    by operating activities:
    Depreciation and amortization.......................................          15,945        13,818       13,690
    Impairment charge...................................................           9,834           ---          ---
    Write-off of loan origination cost..................................             ---           914          ---
    Write-off of revenue equipment......................................             ---         1,023          ---
    Provision (benefit) for deferred income taxes.......................             204         2,570          658
    Provision for doubtful accounts.....................................             960           704          933
    Restricted stock grants and stock appreciation rights...............             879           ---          ---
    Changes in assets and liabilities:
        Trade receivables...............................................          (6,543)        9,910       (5,818)
        Accounts receivable - other.....................................            (922)        2,296           (6)
        Income tax recoverable..........................................             ---           ---          690
        Tires in service................................................             678          (758)         474
        Prepaid expenses and other current assets.......................           1,989        (1,793)       2,793
        Other assets....................................................           1,385          (483)      (1,460)
        Accounts payable and accrued expenses...........................           6,029         1,628          736

        Income tax payable..............................................           2,889           284           51
                                                                              ----------    ----------   ----------
        Net cash provided by operating activities.......................          33,051        33,701       14,450
Cash flows from investing activities:
    Purchase of property and equipment..................................         (23,837)       (7,053)      (6,374)
    Proceeds on sale of property and equipment..........................          22,801        10,291       11,651

    Purchase of a business, net of cash.................................          (3,593)          ---          ---
                                                                              ----------    ----------   ----------
        Net cash (used in) provided by investing activities.............          (4,630)        3,238        5,277
Cash flows from financing activities:
    Purchase of treasury stock .........................................             ---           ---          (17)
    Proceeds from issuance of common stock..............................          25,875            78          598
    Proceeds of long-term debt..........................................           2,040         4,147        3,795
    Payments on long-term debt..........................................         (32,866)      (23,294)     (10,211)
    Principal payments on capital lease obligations.....................         (24,202)      (17,081)     (14,387)
                                                                              ----------    ----------   ----------
        Net cash used in financing activities...........................         (29,153)      (36,150)     (20,222)
                                                                              ----------    ----------   ----------
Increase (decrease) in cash and cash equivalents........................            (732)          789         (495)

Cash and cash equivalents at beginning of year..........................           1,088           299          794
                                                                              ----------    ----------   ----------
Cash and cash equivalents at end of year................................      $      356    $    1,088    $     299
                                                                              ==========    ==========   ==========
Supplemental disclosure of cash flow information:
    Interest paid.......................................................      $    3,825    $ 5,299       $   7,700
    Income taxes paid...................................................      $      270    $  316        $     281
Supplemental disclosure of non-cash flow investing activities:
    Lease obligation incurred in the purchase of equipment..............      $    1,166    $  286        $  12,579

</TABLE>
          See accompanying notes to consolidated financial statements.

                                      -30-
<PAGE>
                               CELADON GROUP, INC.
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                    Years ended June 30, 2004, 2002 and 2001
                  (Dollars in thousands, except share amounts)
<TABLE>
                                     Common                                         Accumulated                            Total
                                     Stock                 Additional   Retained       Other       Treasury                Stock-
                                 No. of Shares              Paid-In     Earnings   Comprehensive    Stock-     Unearned    Holders'
                                   Outstanding   Amount     Capital     (Deficit)  Income/(Loss)    Common   Compensation  Equity
                                 -------------  --------   ----------   ---------  -------------    -------  ------------  -------
<S>                               <C>           <C>         <C>         <C>          <C>            <C>         <C>        <C>
Balance at June 30, 2001          7,539,642     $  257      $59,923     $(6,058)     $(1,051)       $(1,008)      ---      $52,063

Net income                              ---        ---           ---      1,709         ---             ---       ---        1,709
Equity adjustments for foreign
    currency translation                ---        ---           ---        ---         (530)           ---       ---         (530)
                                 -------------  --------   ----------   ---------  -------------    -------  ------------  -------
Comprehensive income (loss)             ---        ---           ---      1,709         (530)           ---        ---       1,179
Tax benefits from stock options         ---        ---            93        ---         ---             ---        ---          93
Treasury stock purchases             (4,250)       ---           ---        ---         ---              (17)      ---         (17)
Treasury stock sales                103,850        ---           ---        ---         ---             415        ---         415
Exercise of incentive stock
options                              38,366        ---            28        ---         ---             155        ---         183
                                 -------------  --------   ----------   ---------  -------------    -------  ------------  -------
Balance at June 30, 2002          7,677,608       $257       $60,044     $(4,349)    $(1,581)       $  (455)       ---     $53,916

Net income                              ---        ---           ---      3,588          ---            ---        ---       3,588
Equity adjustments for foreign
    currency translation                ---        ---           ---        ---         (366)           ---        ---        (366)
                                 -------------  --------   ----------   ---------  -------------    -------  ------------  -------
Comprehensive income (loss)             ---        ---           ---      3,588         (366)           ---        ---       3,222
Tax benefits from stock options         ---        ---            37        ---          ---            ---        ---          37
Exercise of incentive stock
     options                         16,155        ---            11        ---          ---             66        ---          77
                                 -------------  --------   ----------   ---------  -------------    -------  ------------  -------
Balance at June 30, 2003          7,693,763       $257       $60,092     $ (761)     $(1,947)       $  (389)    $  ---     $57,252

Net loss                                ---        ---           ---       (275)        ---             ---        ---        (275)
Equity adjustments for foreign
    currency translation                ---        ---           ---        ---        (408)            ---        ---        (408)
                                 -------------  --------   ----------   ---------  -------------    -------  ------------  -------
Comprehensive loss                      ---        ---           ---        (275)      (408)            ---        ---        (683)
Tax benefits from stock options         ---        ---           247        ---         ---             ---        ---         247
Secondary stock offering          1,853,500         61        24,997        ---         ---             ---        ---      25,058
Restricted stock grants              67,800          3           824        ---         ---             ---       (689)        138
Exercise of incentive stock
    options                         133,907          1           428        ---         ---             389        ---         818
                                 -------------  --------   ----------   ---------  -------------    -------  ------------  -------
Balance at June 30, 2004          9,748,970       $322       $86,588    $(1,036)     $(2,355)       $     0     $ (689)    $82,830
                                 =============  ========   ==========   =========  =============    =======  ============  =======
</TABLE>

                 See accompanying notes to financial statements.

                                      -31-
<PAGE>
                              CELADON GROUP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  June 30, 2004

(1)  ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization

     Celadon Group,  Inc. (the "Company"),  through its  subsidiaries,  provides
long haul, full truckload services between the United States, Canada and Mexico.
The Company's primary trucking subsidiaries are: Celadon Trucking Services, Inc.
("CTSI"), a U.S. based company;  Servicio de Transportation Jaguar, S.A. de C.V.
("Jaguar"),  a Mexican based company and Celadon Canada  ("CelCan"),  a Canadian
based company.

     TruckersB2B,     Inc.     ("TruckersB2B")     is    an    internet    based
"business-to-business" membership program, majority owned by Celadon E-Commerce,
Inc., a wholly owned subsidiary of Celadon Group, Inc.

Summary of Significant Account Policies

Principles of Consolidation and Presentation

     The  consolidated  financial  statements  include  the  accounts of Celadon
Group,  Inc. and its wholly and majority  owned  subsidiaries,  all of which are
wholly  owned except for Jaguar and  TruckersB2B  in which the Company has a 75%
and 81%  interest,  respectively.  All  significant  intercompany  accounts  and
transactions have been eliminated in consolidation.  Unless otherwise noted, all
references to annual periods refer to the respective fiscal years ended June 30.

Use of Estimates

     The  preparation  of financial  statements  in  conformity  with  generally
accepted accounting  principles in the United States requires management to make
estimates  and  assumptions   that  affect  the  reported   amounts  of  assets,
liabilities,  revenues,  expenses  and  related  disclosures  at the date of the
financial  statements and during the reporting  period.  Such estimates  include
provisions for liability claims and uncollectible  accounts  receivable.  Actual
results could differ from those estimates.

Cash and Cash Equivalents

     The Company  considers  all highly  liquid  instruments  with a maturity of
three months or less when purchased to be cash equivalents.

Concentration of Credit Risk

     Financial   instruments,   which   potentially   subject   the  Company  to
concentrations  of  credit  risk,   consist  primarily  of  trade   receivables.
Concentrations  of credit risk with respect to trade  receivables  are generally
limited due to the Company's  large number of customers and the diverse range of
industries,  which  they  represent.   Accounts  receivable  balances  due  from
DaimlerChrysler totaled $3.3 million, or 6.1%, of the gross trade receivables at
June 30, 2004.  The Company had no other  significant  concentrations  of credit
risk.

Accounts Receivable Other

     The primary  components  of accounts  receivable  other are company  driver
advances,  independent  contractor  advances,  and equipment sales  receivables.
Company  driver and  independent  contractor  advances are collected on the next
payroll and settlement dates of sale.

                                      -32-

<PAGE>
                              CELADON GROUP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  June 30, 2004

Property and Equipment

     Property and  equipment are stated at cost.  Property and  equipment  under
capital leases are stated at fair value at the inception of the lease.

     Depreciation  of property and  equipment and  amortization  of assets under
capital leases is generally computed using the straight-line method and is based
on the estimated  useful lives (net of salvage  value) of the related  assets as
follows:

      Revenue and service equipment..............   4-12 years
      Furniture and office equipment.............   4-7 years
      Buildings..................................   20 years
      Leasehold improvements.....................   Lesser of life of lease or
                                                    useful life of improvement

     Initial  delivery  costs  relating  to placing  tractors  and  trailers  in
service,  which  are  included  in  revenue  and  service  equipment,  are being
amortized on a  straight-line  basis over the lives of the assets or in the case
of leased equipment, over the respective lease term. The cost of maintenance and
repairs, including tractor overhauls, is charged to expense as incurred.

     Long-lived  assets are  depreciated  over  estimated  useful lives based on
historical  experience and prevailing industry practice.  Estimated useful lives
are periodically  reviewed to ensure they remain appropriate.  Long-lived assets
are tested for impairment  whenever an event occurs that indicates an impairment
may exist.  Future cash flows and operating  performance  are used for analyzing
impairment  losses. If the sum of expected  undiscounted cash flows is less than
the carrying value an impairment  loss is recognized.  The Company  measures the
impairment  loss by comparing the fair value of the asset to its carrying value.
Fair value is determined  based on a discounted  cash flow analysis or appraised
or estimated market values as appropriate.  Long-lived  assets that are held for
sale are recorded at the lower of carrying value or the fair value less costs to
sell.

Tires in Service

     Original  and  replacement  tires on tractors  and trailers are included in
tires in service and are amortized over 18 to 36 months.

Goodwill

     Goodwill  reflects  the  excess  of cost  over  net  assets  of  businesses
acquired.  Goodwill is accounted for based on Statement of Financial  Accounting
Standards ("SFAS") 142, "Goodwill and Other Intangible  Assets," which addresses
the  financial  accounting  and  reporting  standards  for  the  acquisition  of
intangible  assets outside of a business  combination and for goodwill and other
intangible  assets  subsequent to their  acquisition.  This accounting  standard
requires that goodwill be separately  disclosed from other intangible  assets in
the statement of financial  position,  and no longer be amortized but tested for
impairment  on a periodic  basis.  At April 1, 2004,  the Company  reviewed  the
impairment  test  principles  applied  previously and concluded that there is no
impairment.

Insurance Reserves

     Reserves  for known  claims  and  incurred  but not  reported  claims up to
specific  policy  limits are accrued  based upon  information  provided by third
party administrators. Such amounts are included in accrued insurance and claims.

                                      -33-

<PAGE>
                             CELADON GROUP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  June 30, 2004

Revenue Recognition

     Trucking revenue and related direct cost are recognized on the date freight
is delivered by the Company to the customer  and  collectibility  is  reasonably
assured. Prior to commencement of shipment, the Company will negotiate an agreed
upon price for services to be rendered.

     TruckersB2B  revenue is  recognized  at  different  times  depending on the
product or service purchased by the TruckersB2B member  ("member").  Revenue for
fuel rebates is recognized in the month the fuel was purchased by a member.  The
tire rebate revenue is recognized when proof-of-purchase  documents are received
from  members.  In  most  other  programs,   TruckersB2B  receives  commissions,
royalties  or  transaction  fees based  upon  percentages  of member  purchases.
TruckersB2B records revenue under these programs when earned and it receives the
necessary information to calculate the revenue.

Costs of Products and Services

     Cost of products and services represents the cost of the product or service
purchased or used by the  TruckersB2B  member.  Cost of products and services is
recognized in the period that TruckersB2B  recognizes revenue for the respective
product or service.

Advertising

     Advertising  costs are  expensed as incurred  by the  Company.  Advertising
expenses for fiscal 2004,  2003, and 2002 were $1.3 million,  $1.0 million,  and
$0.6  million,  respectively,  and are included in salaries,  wages and employee
benefits and general,  administrative  and selling  expenses in the statement of
operations.

Income Taxes

     Deferred  taxes are  recognized  for the  future tax  effects of  temporary
differences between the carrying amounts of assets and liabilities for financial
and income tax  reporting,  based on enacted tax laws and rates.  Federal income
taxes are provided on the portion of the income of foreign  subsidiaries that is
expected to be remitted to the United States.

Accounting for Derivatives

     The  Company  from  time-to-time  will  enter  into  derivative   financial
instruments to reduce exposure to fuel and currency price fluctuations.  In June
1998,  the  Financial  Accounting  Standards  Board  ("FASB")  issued  SFAS 133,
"Accounting for Derivative  Instruments and Certain Hedging Activities." In June
2000, the FASB issued SFAS 138,  "Accounting for Certain Derivative  Instruments
and Certain Hedging  Activity,  an Amendment of SFAS 133." SFAS 133 and SFAS 138
require  that all  derivative  instruments  be recorded on the balance  sheet at
their  respective fair values.  In accordance with SFAS 133, the Company adjusts
our derivative instruments to fair value through earnings on a monthly basis.

Earnings per Share ("EPS")

     The Company applies the provisions of the FASB SFAS No. 128,  "Earnings per
Share", which requires companies to present basic EPS and diluted EPS. Basic EPS
excludes  dilution  and is  computed  by  dividing  income  available  to common
stockholders by the weighted-average number of common shares outstanding for the
period.  Diluted EPS  reflects the dilution  that could occur if  securities  or
other  contracts to issue common stock were  exercised or converted  into common
stock or  resulted  in the  issuance  of common  stock  that then  shared in the
earnings of the  Company.  Dilutive  common  stock  options are  included in the
diluted EPS  calculation  using the treasury stock method.  Common stock options
were not  included in the diluted EPS  computation  for 2004 because the options
were  anti-dilutive.

                                      -34-
<PAGE>
                              CELADON GROUP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 June 30, 2004

Stock-based Employee Compensation Plans

     The Company has elected to follow Accounting Principles Board Opinion (APB)
No. 25, "Accounting for Stock Issued to Employees," and related  interpretations
in accounting for its stock options. Under APB 25, because the exercise price of
the Company's  employee  stock options equals the market price of the underlying
stock on the date of  grant,  no  compensation  expense  is  recognized  for the
Celadon  options.  See Note 6 to the Consolidated  Financial  Statements - Stock
Plans for further disclosure.

     SFAS  123,   "Accounting  for  Stock-Based   Compensation,"  and  SFAS  148
"Accounting for Stock-Based  Compensation - Transition and Disclosure"  requires
presentation  of pro forma net income and  earnings per share if the Company had
accounted  for its employee  stock options  granted  subsequent to June 30, 1995
under  the fair  value  method  of that  statement.  For  purposes  of pro forma
disclosure, the estimated fair value of the options is amortized to expense over
the vesting  period.  Under the fair value method,  the Company's net income (in
thousands) and earnings per share would have been:
<TABLE>
                                                                          2004        2003        2002
                                                                        --------    --------    --------
<S>                                                                     <C>         <C>         <C>
Net income (loss)...............................................        $ (275)     $ 3,588     $ 1,709
Stock-based compensation expense (net of tax)...................           404          773         910
                                                                        --------    --------    --------
Adjusted net income (loss)......................................        $ (679)     $ 2,815     $   799
                                                                        ========    ========    ========

Basic and diluted income (loss) per share:
Diluted earnings (loss) per share...............................        $(0.03)     $  0.45     $  0.22
Stock-based compensation expense (net of tax) per share.........        $ 0.06      $  0.10     $  0.12
                                                                        --------    --------    --------
Adjusted diluted earnings (loss) per share......................        $(0.09)(2)  $  0.35(1)  $  0.10(1)
                                                                        ========    ========    ========
---------------------
(1)  Adjusted basic earnings per share was $0.37 in fiscal 2003, and $0.11 in fiscal 2002.
(2)  Fiscal year 2004 does not include the anti-dilutive effect of 449 thousand stock options and other incremental shares.
</TABLE>
Foreign Currency Translation

     Foreign financial statements are translated into U.S. dollars in accordance
with SFAS 52,  "Foreign  Currency  Translation."  Assets and  liabilities of the
Company's  foreign  operations  are  translated  into U.S.  dollars at  year-end
exchange rates. Income statement accounts are translated at the average exchange
rate prevailing during the year. Resulting translation  adjustments are included
in other comprehensive income.

Reclassifications

     Certain  reclassifications  have been  made to the 2003 and 2002  financial
statements in order to conform to the 2004 presentation.

Recent Accounting Pronouncements

     On April 30, 2003,  the FASB issued SFAS 149 "Amendment of Statement 133 on
Derivative  Instruments and Hedging  Activities."  SFAS 149 amends and clarifies
accounting for derivative instruments,  including certain derivative instruments
embedded in other contracts,  and for hedging activities under Statement 133 and
is to be applied  prospectively to contracts entered into or modified after June
30,  2004.  The  Company  adopted  SFAS 149 on July 1,  2003,  and  there was no
material impact on the results of operations and financial position.

     In May 2003, the FASB issued SFAS 150,  "Accounting  for Certain  Financial
Instruments  with  Characteristics  of both  Liabilities  and Equity."  SFAS 150
established  standards  for  how  an  issuer  classifies  and  measures  certain
financial  instruments with  characteristics  of both liabilities and equity. It
requires that an issuer

                                      -35-
<PAGE>
                              CELADON GROUP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  June 30, 2004

classify  certain  financial  instruments as a liability (or as an asset in some
circumstances).  SFAS 150 was  effective for the Company at the beginning of the
first interim period beginning after June 15, 2003. The adoption of SFAS 150 has
not had an impact on the Company's financial statements.

(2)  ACQUISITIONS

     In August 2003, the Company  acquired  certain  assets of Highway  Express,
Inc.  ("Highway").  The results of operations of Highway from August 1, 2003 are
included in the Company's financial  statements for fiscal 2004. The Company has
assigned values to the acquired assets of Highway  consisting  primarily of $8.6
million of property and equipment,  $2.4 million of trade  receivables  and $0.4
million of cash. The purchase price of approximately  $11.4 million consisted of
$4.0  million of cash and a $7.4  million  thirty-six  month note  payable.  The
Company  used  borrowings  under its existing  credit  facility to fund the cash
portion  of  the  purchase  price.   Highway's   revenue  for  fiscal  2002  was
approximately $27.0 million.

     We  purchased,  in March 2002,  certain  fixed assets of  Burlington  Motor
Carriers,  consisting  primarily of approximately 300 tractors and 900 trailers,
and we incurred $7.5 million in notes payable related to the transaction.

(3)  PROPERTY, EQUIPMENT AND LEASES

Property, Equipment and Revenue Equipment

     Property and equipment consists of the following (in thousands):
<TABLE>
                                                              2004               2003
                                                          -----------        -----------
<S>                                                        <C>                <C>
Revenue equipment owned.............................       $  66,182          $  58,805
Revenue equipment under capital leases..............          17,390             53,263
Furniture and office equipment......................           3,134              4,352
Land and buildings..................................          12,814             10,484
Service equipment...................................             757                730
Leasehold improvements..............................           1,807              1,685
                                                          -----------        -----------
                                                            $102,084            $129,319
                                                          ===========        ===========
</TABLE>
     Included in accumulated  depreciation was $6.6 million and $25.6 million in
2004 and 2003, respectively,  related to revenue equipment under capital leases.
Depreciation and  amortization  expense relating to property and equipment owned
and  revenue  equipment  under  capital  leases,  including  gains  (losses)  on
disposition of equipment and impairment of trailers,  was $25.8 million in 2004,
$13.8 million in 2003 and $13.7 million in 2002.

Impairment of Equipment

     In  September  2003,  the  Company  initiated  a plan to dispose of certain
trailers and  recognized a pretax  impairment  charge of $9.8 million.  The plan
included approximately 1,600 trailers including all 48-foot trailers in addition
to  53-foot  trailers  over 9 years  old.  The  Company  plans  to  replace  the
approximately 1,600 trailers with 1,300 new 53-foot trailers over the next year.
The pretax  impairment  charge consisted of a write-down of revenue equipment by
$8.4 million (net of accumulated depreciation), write-off of tires in-service of
$0.9 million and an accrual for costs of disposal of $0.5 million. In connection
with the plan, the Company has equipment held for sale of $0.4 million  included
in property and equipment on June 30, 2004 consolidated balance sheet.


                                      -36-
<PAGE>
                              CELADON GROUP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  June 30, 2004

(4)  LEASE OBLIGATIONS AND LONG-TERM DEBIT AND STOCKHOLDERS' EQUITY

Lease Obligations

     The Company leases certain  revenue and service  equipment  under long-term
lease agreements, payable in monthly installments with interest at rates ranging
from 4.8% to 8.7% per annum, maturing at various dates through 2011.

     The Company leases warehouse and office space under noncancellable
operating leases expiring at various dates through September 2021. Certain
leases contain renewal options.

     Future minimum lease  payments  relating to capital leases and to operating
leases with initial or remaining  terms in excess of one year are as follows (in
thousands):
<TABLE>
                                                                         Capital        Operating
                       Year ended June 30                                Leases          Leases
                       ------------------                                -------        --------
<S>                                                                      <C>             <C>
2005  .................................................................. $3,287          $37,298
2006  ..................................................................  1,067           32,433
2007  ..................................................................    554           34,649
2008  ..................................................................    147           19,918
2009  ..................................................................    115            7,188
Thereafter..............................................................    663           28,463
                       ------------------                                -------        --------
    Total minimum lease payments........................................ $5,833         $159,949
                                                                                        ========
Less amounts representing interest......................................    516
                                                                         -------
Present value of net minimum lease payments............................. $5,317
Less Current maturities.................................................  3,040
                                                                         -------
    Non-current portion................................................. $2,277
                                                                         =======
</TABLE>
Total rental expense for operating leases is as follows (in thousands):
<TABLE>
                                                                                 2004          2003           2002
                                                                                 ----          ----           ----
        <S>                                                                   <C>           <C>            <C>
        Revenue and service equipment.........................................$30,802       $25,817        $22,079
        Office facilities and terminals........................................ 2,297         2,149          2,285
                                                                              -------       -------        -------
                                                                              $33,099       $27,966        $24,364
                                                                              =======       =======        =======
</TABLE>
Long-Term Debt

     The Company's  outstanding  borrowings  consist of the following at June 30
(in thousands):
<TABLE>
                                                                                2004       2003
                                                                              --------    -------
         <S>                                                                  <C>         <C>
         Outstanding amounts under Credit Agreement (collateralized
            by certain trade receivables and revenue equipment)..........     $6,017      $23,144
         Other borrowings................................................      3,160        9,418
                                                                              --------    -------
                                                                               9,177       32,562
         Less current maturities.........................................      2,270        6,156
                                                                              --------    -------
            Non-current portion..........................................     $6,907      $26,406
                                                                              ========    =======
</TABLE>

                                      -37-
<PAGE>
                              CELADON GROUP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  June 30, 2004

Lines of Credit

     The Company has a $55.0 million banking facility ("Credit  Agreement") with
Fleet Capital  Corporation,  Fleet Capital Canada  Corporation and several other
lenders named in the Loan Agreement.  The  arrangement  includes a $44.2 million
revolving  loan and a $10.8 million term loan.  The Company's  Credit  Agreement
expires in September  2005 (fiscal  2006).  Interest is based,  at the Company's
option, upon either the bank's base rate as defined in the Credit Agreement plus
a margin ranging from 0.0% to 3.0% or the London  Interbank  Offered Rate plus a
margin ranging from 1.5% to 3.5% depending upon  performance by the Company.  At
June 30, 2004, the interest rate charged on outstanding  borrowings was 3.9%. In
addition, the Company pays a commitment fee of .25% on the unused portion of the
Credit  Agreement.  As  of  June  30,  2004,   approximately  $6.0  million  was
outstanding  on the term loan and there  were no amounts  outstanding  under the
revolving loan.

     Amounts  available under the Credit Agreement are determined based upon the
Company's borrowing base, as defined. In addition,  there are certain covenants,
which restrict, among other things, the payment of cash dividends annual capital
expenditures,  annual  lease  payments,  and  requires the Company to maintain a
minimum  fixed charge  coverage  ratio along with certain  financial  ratios and
certain other financial conditions. Such borrowings are secured by a significant
portion of the Company's assets, primarily trade receivables.

Other Borrowings

     Other  borrowings  consist  primarily of mortgage debt  financing and notes
payable for equipment  purchase,  which are collateralized by the equipment.  At
June 30, 2004, the interest rate charged on outstanding  borrowings  ranged from
6.5% to 7.5%.

     Maturities  of  long-term  debt for the years ending June 30 are as follows
(in thousands):

             2005..................     $2,270
             2006......... ........      4,560
             2007..................        142
             2008..................        153
             2009..................        166
             Thereafter............      1,886
                                       --------
                                        $9,177
                                       ========

Stockholders' Equity

     In the fourth  quarter of fiscal 2004, we issued 1.85 million shares of our
common stock in a public offering.  The stock issuance  resulted in net proceeds
to us of approximately  $25.1 million. We used the proceeds to repay all amounts
outstanding under our revolving credit facility. The balance of the net proceeds
were used to pay off debt and leases related to equipment.

(5)  EMPLOYEE BENEFIT PLANS

401(k) Profit Sharing Plan

     The Company has a 401(k) profit  sharing plan which permits U.S.  employees
of the  Company to  contribute  up to 15% of their  annual  compensation,  up to
certain  Internal Revenue Service limits,  on a pretax basis. The  contributions
made by each  employee  are fully  vested  immediately  and are not  subject  to
forfeiture. The Company makes a discretionary matching contribution of up to 50%
of the  employee's  contribution  up to 5% of  their  annual  compensation.  The
aggregate Company contribution may not exceed 5% of the employee's compensation.
Employees vest in the Company's  contribution to the plan at the rate of 20% per
year from the date of employee  anniversary.  Contributions  made by the Company
during 2004,  2003 and 2002 amounted to $287 thousand,  $281 thousand,  and $232
thousand, respectively.

                                      -38-

<PAGE>
                              CELADON GROUP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  June 30, 2004

(6)  STOCK PLANS

Stock Options - Celadon Group, Inc.

     The Company has Stock Option Plans ("Plan") which provides for the granting
of stock  options,  stock  appreciation  rights and  restricted  stock awards to
purchase not more than 1,350,000  shares of Common Stock,  subject to adjustment
under certain circumstances,  to select management, key employees, and directors
of the Company and its subsidiaries.  The options have a six-month to three-year
vesting period.

     In fiscal  2004,  the Company  granted  67,800  restricted  stock awards to
senior  management at $12.20.  These grants vest over four years contingent upon
the Company  meeting certain  financial  targets.  In determining  whether these
targets were met for fiscal 2004 the Company's  Board of Directors  excluded the
impact of a $9.8 milion pretax  trailer  impairment  charge,  outstanding  stock
appreciation  rights,  and the increased  dilution  resulting from the Company's
secondary  stock  offering.  These  grants were valued at $827  thousand and the
portion  that has not  vested  is  accounted  for in  unearned  compensation  of
restricted  stock in  equity.  Compensation  expense of $138  thousand  has been
recognized in salaries, wages and employee benefits.

     The weighted-average per share fair value of the individual options granted
during  fiscal year 2004 and 2003 for Celadon is  estimated  as $8.08 and $4.58,
respectively on the date of grant.

     The fair values of Celadon option grants for 2004 and 2003 were  determined
using a Black-Scholes  option-pricing  model with the following weighted average
assumptions:

                                          2004            2003
                                        ----------      ----------
            Dividend yield............      0               0
            Volatility................    51.7%           59.9%
            Risk-free interest rate...    2.88%           1.95%
            Forfeiture rate...........     0.0%            0.0%
           Expected life..............    7 years         7 years

     Stock option activity for Celadon is summarized below:
<TABLE>
                                                                  Shares of            Weighted
                                                                 Common Stock          Average
                                                                 Attributable          Exercise
                                                                  To Options       Price of Options
                                                              ------------------- -------------------
               <S>                                               <C>                      <C>
               Unexercised at June 30, 2001 (Restated)(1)...      908,349                 $ 7.62
               Granted(1)...................................      326,664                 $ 5.73
               Exercised....................................      (33,366)                $ 4.49
               Forfeited(1).................................     (231,296)                $10.24
                                                                 ---------                ------

               Unexercised at June 30, 2002 (Restated)(1)...      970,351                 $ 6.46
               Granted(1)...................................       16,000                 $ 8.00
               Exercised....................................      (16,155)                $ 4.77
               Forfeited....................................      (13,276)                $ 8.21
                                                                  --------                ------

               Unexercised at June 30, 2003 (Restated)(1)...      956,920                 $ 6.68
               Granted......................................       16,000                 $15.93
               Exercised....................................     (133,907)                $ 6.11
               Forfeited....................................      (25,831)                $13.21
                                                                  --------                ------

               Unexercised at June 30, 2004.................      813,182                 $ 6.55
                                                                  =======
               ---------------------
               (1) Shares of common stock attributable to options and weighted average exercise price of options
                   have been restated as of June 30, 2001, June 30, 2002, and June 30, 2003, to include stock
                   options granted to the directors of the Company.
</TABLE>
                                      -39-
<PAGE>
                               CELADON GROUP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  June 30, 2004

     The following  table  summarizes  information  concerning  outstanding  and
exercisable Celadon options at June 30, 2004:
<TABLE>
                              Options Outstanding                         Options Exercisable

                                          Weighted-
                                          Average         Weighted                       Weighted
      Range of                           Remaining        Average                         Average
      Exercise           Number         Contractual       Exercise        Number         Exercise
       Prices         Outstanding          Life            Price        Exercisable       Price
    ------------      -----------    ----------------   -----------     -----------      --------
    <S>               <C>            <C>                <C>             <C>              <C>
       $0-$5             295,182            6.54            $3.47         267,099          $4.03
       $5-$10            395,500            6.46            $6.94         332,167          $7.07
      $10-$15            106,500            2.93           $12.18         106,500         $11.04
      $15-$20             16,000            9.83           $15.93            ---            ---
</TABLE>
     Celadon  stock  options  exercisable  at June 30, 2004,  2003 and 2002 were
705,766, 713,368 and 518,137,  respectively (2003 and 2002 restated for director
stock option plans).

Stock Options- TruckersB2B, Inc.

     On March 15,  2000,  TruckersB2B,  Celadon -  E-Commerce's  majority  owned
subsidiary,  adopted the 2000 Stock  Option Plan ("2000  Plan").  Under the 2000
Plan,  TruckersB2B is authorized to grant options for up to 1,000,000  shares of
common stock to employees of TruckersB2B, Celadon, directors of TruckersB2B, and
vendors.  Options  granted under the 2000 Plan are for periods not to exceed ten
years and must be issued at prices not less than 100% of the fair  market  value
of  the  stock  on the  date  of  grant.  Incentive  stock  options  granted  to
stockholders  with greater than 10% ownership of the  outstanding  stock are for
periods not to exceed five years.  Options  generally vest at a rate of 2% to 5%
per month.  In certain cases, a portion of the options vests  immediately on the
date of grant.

     TruckersB2B  has elected to follow APB 25,  "Accounting for Stock Issued to
Employees,"  and related  interpretations  in accounting  for its stock options.
Under APB 25, because the exercise  price of TruckersB2B  employee stock options
equals  the  market  price of the  underlying  stock on the  date of  grant,  no
compensation expense is recognized for the options.

     The weighted-average per share fair value of the individual options granted
is estimated as $0.22 and $0.46,  on the date of the grant,  during  fiscal year
2004 and fiscal 2002,  respectively.  No options were granted during fiscal year
2003.

     The fair value of TruckersB2B option grants for 2004 and 2002, respectively
was determined  using a  Black-Scholes  option-pricing  model with the following
weighted average assumptions;

                                                      2004             2002
                                                      ----             ----
             Dividend yield..................           0                0
             Volatility......................          .1%              .1%
             Risk-free interest rate.........         2.4%             5.5%
             Forfeiture rate.................           0%               0%
             Expected life...................        7 years         7 years


                                      -40-
<PAGE>
                               CELADON GROUP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  June 30, 2004

     Stock option activity for TruckersB2B is summarized below:
<TABLE>
                                                                                       Weighted
                                                     Shares of Common Stock           Average Exercise
                                                     Attributable to Options          Price of Options
                                                     ----------------------          ------------------
    <S>                                                     <C>                            <C>
    Unexercised at June 30, 2001 (Restated)(1)..........     735,750                       $0.92
    Granted(1)..........................................     140,000                       $1.46
    Forfeited...........................................    (336,000)                      $0.98
                                                            --------                       -----

    Unexercised at June 30, 2002 (Restated)(1)..........     539,750                       $1.03
    Forfeited(1)........................................     (30,500)                      $0.87
                                                             -------                       -----

    Unexercised at June 30, 2003 (Restated)(1)..........     509,250                       $1.04
    Granted.............................................     200,000                       $1.46
    Forfeited...........................................    (54,250)                       $1.01
                                                             -------                       -----

    Unexercised at June 30, 2004........................     655,000                       $1.17
                                                             =======
    ----------------------
    (1) Shares of common stock attributable to options and weighted average exercise price of options have been restated to
        include stock options granted to certain employees.
</TABLE>
     The following  table  summarizes  information  concerning  outstanding  and
exercisable TruckersB2B options at June 30, 2004:
<TABLE>
                                       Options Outstanding                              Options Exercisable
                                            Weighted-
                                             Average            Weighted                               Weighted
      Range of                              Remaining            Average                               Average
      Exercise            Number           Contractual          Exercise            Number             Exercise
       Prices           Outstanding            Life               Price           Exercisable           Price
     ----------         -----------       --------------       -----------        -----------        --------
     <S>                <C>               <C>                  <C>                 <C>               <C>
        $0-$1             335,000              5.9                $0.89               313,250           $0.91
        $1-$2             320,000              9.2                $1.46                60,000           $1.46
</TABLE>
Stockholder Rights Plan

     On June 28, 2000, the Company's  Board of Directors  approved a Stockholder
Rights Plan whereby,  on July 31, 2000,  common stock purchase rights ("Rights")
were  distributed  as a dividend  at the rate of one Right for each share of the
Company's  common stock held as of the close of business on July 20,  2000.  The
Rights  will  expire  on July 18,  2010.  Under  the plan,  the  Rights  will be
exercisable only if triggered by a person or group's  acquisition of 15% or more
of the  Company's  common  stock.  Each  right,  other than  Rights  held by the
acquiring  person or group,  would  entitle  its holder to  purchase a specified
number of the  Company's  common  shares for 50% of their  market  value at that
time.

     Following the acquisition of 15% or more of the Company's common stock by a
person or group,  the Board of  Directors  may  authorize  the  exchange  of the
Rights,  in whole or in part,  for shares of the  Company's  common  stock at an
exchange  ratio of one share for each Right,  provided  that at the time of such
proposed exchange no person or group is then the beneficial owner of 50% or more
of the Company's common stock.

     Unless a 15%  acquisition  has occurred,  the Rights may be redeemed by the
Company at any time prior to the termination date of the plan.

                                      -41-
<PAGE>
                               CELADON GROUP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  June 30, 2004

(7)  EARNINGS PER SHARE

     The following is a reconciliation  of the numerators and denominators  used
in computing earnings per share (in thousands):
<TABLE>
                                                                            2004      2003        2002
                                                                           ------    ------      ------
   <S>                                                                     <C>       <C>         <C>
   Income (loss) available to common shareholders....................       $(275)   $3,588      $1,709
                                                                            =====    ======      ======

   Basic earnings (loss) per share:
        Weighted - average number of common
            shares outstanding.......................................      7,986      7,688       7,611
                                                                           =====      =====       =====

            Basic earnings (loss) per share..........................      $(0.03)    $0.47       $0.22
                                                                           ======     =====       =====

   Diluted earnings (loss) per share:
        Weighted - average number of common
            shares outstanding.......................................      7,986      7,688       7,611
        Effect of stock options and other incremental shares.........        ---        347         142
                                                                           ------    ------      ------

        Weighted-average number of common shares
            outstanding - diluted....................................      7,986      8,035       7,753
                                                                           =====      =====       =====

        Dilute earnings (loss) per share.............................      $(0.03)    $0.45       $0.22
                                                                           ======     =====       =====
</TABLE>
     Diluted  loss  per  share  for  fiscal  year  2004  does  not  include  the
anti-dilutive effect of 449 thousand stock options and other incremental shares,
respectively.

(8)  RELATED PARTY TRANSACTIONS

     In October  2001,  the Company  sold  103,850  shares of treasury  stock to
non-executive members of management. The Company granted loans totaling $449,000
to the  non-executive  management  with a  5-year  term.  As of June  30,  2004,
approximately $70,000 of the aforementioned loans remained outstanding.

(9)  COMMITMENTS AND CONTINGENCIES

     The Company has  outstanding  commitments to purchase  approximately  $45.6
million of revenue equipment at June 30, 2004, which will be financed  utilizing
long-term lease agreements.

     Standby letters of credit,  not reflected in the accompanying  consolidated
financial statements, aggregated approximately $6.8 million at June 30, 2004.

     The Company has  employment  and  consulting  agreements  with  various key
employees providing for minimum combined annual compensation over the next three
fiscal years of $958  thousand in fiscal 2005,  $453 thousand in fiscal 2006 and
$19 thousand in fiscal 2007.

     During fiscal 2004, the Company received approximately $4.4 million in fuel
tax refunds relating to prior periods.  The Company recognized $3.1 million as a
reduction  in fuel  expense  during the  period.  The  balance is  reserved  for
obligations pending settlement.

                                      -42-
<PAGE>
                               CELADON GROUP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  June 30, 2004

     There are various claims,  lawsuits and pending actions against the Company
and its  subsidiaries  in the normal course of the  operations of its businesses
with respect to cargo, auto liability or income taxes. 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 in any given period.

     The Company is a party to routine  litigation  incidental  to its business,
primarily  involving claims for bodily injury and cargo or other property damage
or loss incurred in the  transportation of freight.  In fiscal 2004, the Company
is self-insured on auto liability claims,  in the United States and Canada,  for
the first $1.0 million with an aggregate  deductible of $2.75 million limited to
$1.5 million per occurrence. In fiscal 2005, the Company is self-insured on auto
liability  claims,  in the United States and Canada,  for the first $2.5 million
dollars of an accident  claim. In the fourth quarter of fiscal 2004, the Company
incurred one  significant  accident which was accrued for the maximum  exposure.
The Company is also responsible for administrative expenses, for each occurrence
involving  personal injury or property damage.  The Company is also self-insured
for the full amount of all  physical  damage  losses,  for workers  compensation
losses up to $1.5 million per claim,  and for cargo  claims up to $100  thousand
per  shipment.  Subject to these  self-insured  retention  amounts,  our current
workers'  compensation policy provides coverage up to a maximum per claim amount
of $10.0  million,  and our  current  cargo  loss and damage  coverage  provides
coverage  up to $1.0  million  per  shipment.  The  Company  maintains  separate
insurance in Mexico  consisting  of bodily injury and property  damage  coverage
with  acceptable  deductibles.  Management  believes its  uninsured  exposure is
reasonable  for  the  transportation   industry,   based  on  previous  history.
Consequently,  the  Company  does not  believe  that the  litigation  and claims
experienced will have a material impact on our financial  position or results of
operations.

     Shortages  of fuel,  increases  in fuel prices or  rationing  of  petroleum
products  can  have  a  materially   adverse   effect  on  the   operations  and
profitability of the Company. The Company cannot predict whether high fuel price
levels will continue in the future or the extent to which fuel  surcharges  will
be collected to offset such increases.  During the years ended June 30, 2004 and
2003,  the  Company  recognized  approximately  $35  thousand  of income and $98
thousand of expense,  respectively  on futures  contracts and  commodity  collar
transactions which is included in fuel expense.

(10) INCOME TAXES

     The income tax provision for operations in 2004, 2003 and 2002 consisted of
the following (in thousands):
<TABLE>
                                                               2004        2003         2002
                                                             -------     -------      -------
Current:
     <S>                                                     <C>          <C>          <C>
     Federal  ...............................................$2,484       $ ---        $ ---
     State and local............................................256          74           97
     Foreign....................................................376        (302)          90
                                                             -------     -------      -------
         Total Current........................................3,116        (228)        187
                                                            -------      -------      -------
Deferred:
     Federal  ..................................................730       2,226          740
     State and local.............................................75         409           39
     Foreign...................................................(478)        541          249
                                                             -------     -------      -------
         Total Deferred.........................................327       3,175        1,028
                                                             -------     -------      -------
         Total...............................................$3,443      $2,948       $1,215
                                                             =======     =======     ========
</TABLE>
     No  provision  is made  for U.S.  federal  income  taxes  on  undistributed
earnings of foreign subsidiaries of approximately $7.8 million at June 30, 2004,
as  management  intends to  permanently  reinvest such earnings in the Company's
operations in the respective  foreign  countries  where earned.  Included in the
consolidated  income before income taxes is income of approximately $0.2 million
generated from foreign operations in fiscal 2004.

                                      -43-
<PAGE>
                               CELADON GROUP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  June 30, 2004

     The Company's income tax expense varies from the statutory federal tax rate
of 35% to income before income taxes as follows (in thousands):
<TABLE>
                                                            2004          2003         2002
                                                           -------       -------      -------
<S>                                                        <C>           <C>          <C>
Computed "expected" income tax expense...............       $1,109        $2,288       $1,023
State taxes, net of federal benefit..................          215           391           89
Non-deductible expenses..............................        1,252           314           68
Settlement of IRS audit..............................          993           ---          ---
Other, net   ........................................         (126)          (45)          35
                                                           -------       -------      -------
         Actual income tax expense...................       $3,443        $2,948       $1,215
                                                           =======       =======      =======
</TABLE>
     The Company has reached final settlements with the Internal Revenue Service
related to all of the audits of the Company's  consolidated  federal  income tax
returns  through  fiscal  year June 30,  2001.  As a result  of the  settlement,
Celadon applied $993 thousand against its net operating loss carryforward during
fiscal year 2004.

     The tax  effect of  temporary  differences  that  give rise to  significant
portions of the  deferred tax assets and  liabilities  at June 30, 2004 and 2003
consisted of the following (in thousands):
<TABLE>
                                                                   2004              2003
                                                                ---------        ----------
Deferred tax assets:
     <S>                                                       <C>              <C>
     Allowance for doubtful accounts........................   $      595       $       290
     Insurance reserves.....................................        1,906             1,211
     Net operating loss carryforwards.......................        1,315             3,255
     Alternative minimum tax credit carryforward............          635               628
     Other .................................................          503               878
                                                                ---------        ----------
           Total deferred tax assets........................     $  4,954         $   6,262
                                                                =========        ==========

Deferred tax liabilities:
     Property and equipment.................................     $ (7,448)        $  (7,329)
     Capital leases.........................................       (2,122)           (4,542)
     Other .................................................       (3,940)           (2,743)
                                                                ---------        ----------
           Total deferred tax liabilities...................     $(13,510)        $ (14,614)
                                                                ==========       ============

Net current deferred tax assets.............................      $ 1,974         $   2,296
Net non-current deferred tax liabilities....................      (10,530)          (10,648)
                                                                ---------        ----------
           Total net deferred tax liabilities...............      $(8,556)        $  (8,352)
                                                                --========       ===========
</TABLE>
     As of June 30,  2004,  the Company had  approximately  $3.4  million of net
operating loss carryforwards with expiration dates beginning in 2015.

(11) SEGMENT INFORMATION AND SIGNIFICANT CUSTOMERS

     The Company operates in two segments,  transportation  and e-commerce.  The
Company generates revenue, in the transportation segment, primarily by providing
truckload hauling services through its subsidiaries,  CTSI,  Jaguar, and CelCan.
The Company  provides  certain services over the Internet through its e-commerce
subsidiary,  TruckersB2B.  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 the performance of its
operating segments based on operating income (loss).

                                      -44-
<PAGE>
                               CELADON GROUP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  June 30, 2004
<TABLE>
                                                                           Fiscal year ended
                                                                                June 30,
                                                                         (Dollars in thousands)

                                                                     2004           2003            2002
                                                                  ----------     ----------       --------
<S>                                                               <C>            <C>              <C>
Operating revenues
    Transportation.................................................$389,813        $359,883       $330,321
    E-Commerce........................................................8,110           7,222          6,678
                                                                  ----------     ----------       --------
                                                                    397,923         367,105        336,999

Operating income
    Transportation....................................................5,558          11,522          9,659
    E-Commerce........................................................1,513           1,212            886
                                                                  ----------     ----------       --------
                                                                      7,071          12,734         10,545

Depreciation and amortization
    Transportation...................................................25,722          13,750         13,616
    E-Commerce.......................................................... 57              68             74
                                                                  ----------     ----------       --------
                                                                     25,779          13,818         13,690

Interest income
    Transportation...................................................... 40              85            114

Interest expense
    Transportation....................................................3,684           6,127          7,489
    E-Commerce.......................................................... 79             159            112
                                                                  ----------     ----------       --------
                                                                      3,763           6,286          7,601

Income before taxes
    Transportation....................................................1,734           5,484          2,150
    E-Commerce........................................................1,434           1,052            774
                                                                  ----------     ----------       --------
                                                                      3,168           6,536          2,924

Total assets
    Transportation..................................................149,824         160,970        188,508
    E-Commerce........................................................1,486           1,103          1,523
                                                                  ----------     ----------       --------
                                                                    151,310         162,073        190,031

Special charges included in segment profit loss
    Trailer impairment charge (Transportation) .......................9,834             ---            ---
    Re-financing of debt (Transportation) ..............................---             914            ---
</TABLE>

          See accompanying notes to consolidated financial statements.

                                      -45-
<PAGE>
                               CELADON GROUP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  June 30, 2004


     Information as to the Company's operations by geographic area is summarized
below:  (in thousands).  The Company  allocates  operating  revenue based on the
country of origin of the tractor hauling the freight.
<TABLE>
                                                               2004            2003           2002
                                                            -----------     ----------     ----------
<S>                                                         <C>             <C>            <C>
Operating revenue:
         United States...............................        $322,961        $301,492        $268,902
         Canada   ...................................          55,580          47,524          47,900
         Mexico   ...................................          19,382          18,089          20,197
                                                            -----------     ----------     ----------
                  Total..............................        $397,923        $367,105        $336,999
                                                            ===========     ==========     ==========

Long lived assets:
         United States...............................         $55,798         $65,860         $81,940
         Canada   ...................................           4,698           9,337          10,684
         Mexico   ...................................           1,305           1,770           2,354
                                                            -----------     ----------     ----------
                  Total..............................         $61,801         $76,967         $94,978
                                                            ===========     ==========     ==========
</TABLE>
     The Company's  largest  customer is  DaimlerChrysler,  which  accounted for
approximately  9%, 12%, and 19% of the Company's  total revenue for fiscal 2004,
2003 and 2002,  respectively.  The Company transports  DaimlerChrysler  original
equipment  automotive  parts primarily  between the United States and Mexico and
Daimler  Chrysler  after-market  replacement  parts and  accessories  within the
United States. The Company's agreement with  DaimlerChrysler is an agreement for
international freight with the Chrysler division, which expires in October 2006.
No other  customer  accounted  for more than 5% of the  Company's  total revenue
during any of its three most recent fiscal years.


                                      -46-
<PAGE>
                               CELADON GROUP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  June 30, 2004

(12) SELECTED QUARTERLY DATA (Unaudited)

     Summarized  quarterly  data for fiscal 2004 and 2003 follows (in  thousands
except per share amounts):
<TABLE>
                                                                   Fiscal Year 2004
                                                       1st Qtr.     2nd Qtr.    3rd Qtr.   4th Qtr.
                                                      ---------    ---------   ---------  ---------
         <S>                                          <C>           <C>         <C>        <C>
         Operating revenues...........................$ 95,651      $97,137     $98,822    $106,313
         Operating expenses(1)........................ 101,561       93,084      94,913     101,294
                                                      ---------    ---------   ---------  ---------

         Operating income (loss)........................(5,910)       4,053       3,909       5,019
         Other expense, net..............................1,156        1,020       1,074         653
                                                      ---------    ---------   ---------  ---------

         Income (loss) before taxes.....................(7,066)       3,033       2,835       4,366
         Income tax expense (benefit) ..................(1,526)       1,507       1,464       1,998
                                                      ---------    ---------   ---------  ---------

         Net income (loss)............................$ (5,540)      $1,526      $1,371     $ 2,368
                                                      =========    =========    ========   =========

         Basic income (loss) per share................$  (0.72)      $ 0.20      $ 0.18      $ 0.28
                                                      =========    =========    ========   =========
         Diluted income (loss) per share..............$  (0.72)      $ 0.19      $ 0.17      $ 0.26
                                                      =========    =========    ========   =========

                                                                   Fiscal Year 2004
                                                       1st Qtr.     2nd Qtr.    3rd Qtr.   4th Qtr.
                                                      ---------    ---------   ---------  ---------
         Operating revenues............................$93,560      $90,827     $90,686     $92,032
         Operating expenses.............................89,624       87,675      88,670      88,402
                                                      ---------    ---------   ---------  ---------

         Operating income  ..............................3,936        3,152       2,016       3,630
         Other expense, net(2)...........................2,416        1,417       1,222       1,143
                                                      ---------    ---------   ---------  ---------

         Income before taxes.............................1,520        1,735         794       2,487
         Income tax expense................................629          707         340       1,272
                                                      ---------    ---------   ---------  ---------

         Net income......................................$ 891      $ 1,028       $ 454      $1,215
                                                      =========    =========    ========   =========

         Basic income per share.........................$.0.12      $ 0.13       $ 0.06      $ 0.16
                                                      =========    =========    ========   =========
         Diluted income per share.......................$ 0.11      $ 0.13       $ 0.06      $ 0.15
                                                      =========    =========    ========   =========
         ------------------------
         (1) Includes $9.8 million trailer impairment charge in the first quarter and a $3.1 million tax
             refund in the fourth quarter.
         (2) Includes $0.9 million write-off of unamortized loan origination fees in the first quarter.
</TABLE>

                                      -47-
<PAGE>
                                                                   SCHEDULE II

                               CELADON GROUP, INC.
                        VALUATION AND QUALIFYING ACCOUNTS

                    Years ended June 30, 2004, 2003 and 2002

<TABLE>
                                         Balance at       Charged to                             Balance at
                                         Beginning        Costs and                                End of
Description                              Of Period         Expenses      Deductions                Period
<S>                                    <C>                <C>            <C>                       <C>
Year ended June 30, 2002:

Allowance for doubtful accounts        $1,010,031          $932,657     $1,002,566      (a)         $940,122

Reserves for claims payable
     as self insurer                   $3,212,339         $6,203,768     $5,024,203      (b)       $4,391,904

Year ended June 30, 2003:

Allowance for doubtful accounts          $940,122          $704,155         $579,519   (a)       $1,064,758

Reserves for claims payable
     as self insurer                   $4,391,904        $6,905,684       $5,172,252   (b)       $5,172,252

Year ended June 30, 2004:

Allowance for doubtful accounts        $1,064,758          $959,771         $742,314   (a)       $1,282,215

Reserves for claims payable
     as self insurer                   $5,172,252       $12,938,284      $10,376,949   (b)       $7,733,587


(a) Represents accounts receivable write-offs.
(b) Represents claims paid.

</TABLE>
                                      -48-
<PAGE>

Item 9.  Changes in and Disagreements with Accountants on Accounting and
         Financial Disclosure

     There were no changes in or disagreements with accountants on accounting or
financial disclosure within the last three fiscal years.

Item 9A. Controls and Procedures

     As required by Rule 13a-15 under the  Exchange  Act, we have carried out an
evaluation of the  effectiveness  of the design and operation of our  disclosure
controls and procedures as of the end of the period covered by this report. This
evaluation was carried out under the supervision and with the  participation  of
our management,  including our Chief  Executive  Officer and our Chief Financial
Officer.  Based upon that  evaluation,  our Chief  Executive  Officer  and Chief
Financial  Officer  concluded that our disclosure  controls and procedures  were
effective as of the end of the period covered by this report.  During our fourth
fiscal  quarter,  there were no changes in our internal  control over  financial
reporting  that  have  materially  affected,  or that are  reasonably  likely to
materially affect, our internal control over financial reporting.

     Disclosure  controls and procedures are controls and other  procedures that
are designed to ensure that information  required to be disclosed in our reports
filed or submitted under the Exchange Act is recorded, processed, summarized and
reported  within  the time  periods  specified  in the SEC's  rules  and  forms.
Disclosure  controls and procedures include controls and procedures  designed to
ensure that information  required to be disclosed in our reports filed under the
Exchange Act is accumulated and communicated to management,  including our Chief
Executive   Officer  as  appropriate,   to  allow  timely  decisions   regarding
disclosures.

     We have confidence in its internal  controls and procedures.  Nevertheless,
our  management,  including  the Chief  Executive  Officer  and Chief  Financial
Officer,  does not expect that our  disclosure  controls and  procedures  or our
internal  controls  will prevent all errors or  intentional  fraud.  An internal
control  system,  no matter how well  conceived and  operated,  can provide only
reasonable,  not  absolute,  assurance  that  the  objectives  of such  internal
controls are met. Further, the design of an internal control system must reflect
the fact that there are resource constraints,  and the benefits of controls must
be considered  relative to their costs.  Because of the inherent  limitations in
all internal  control  systems,  no evaluation of controls can provide  absolute
assurance  that all control  issues and instances of fraud,  if any,  within the
Company have been detected.


                                      -49-
<PAGE>

                                    PART III

     Certain information  required to be set forth in Part III of this report is
incorporated by reference to our definitive  Proxy Statement which will be filed
with the SEC not later than 120 days after the end of the fiscal year covered by
this  report.  Only those  sections  of the  definitive  Proxy  Statement  which
specifically  address the items set forth herein are  incorporated by reference.
Such  incorporation  does not include the  Compensation  Committee Report or the
Performance Graph included in the definitive Proxy Statement.

Item 10. Directors and Executive Officers of the Registrant

     The  information  required by this Item,  with the exception of the Code of
Ethics disclosure  below, is incorporated  herein by reference to our definitive
Proxy  Statement  to be filed in  connection  with the 2004  Annual  Meeting  of
Stockholders.

Code of Ethics

     We have  adopted a Code of Ethics that applies to our  principal  executive
officer,   principal   financial  officer,   principal   accounting  officer  or
controller,  or  persons  performing  similar  functions.  A copy of the Code of
Ethics was filed as  Exhibit  14 to our Annual  Report on Form 10-K for the year
ended June 30, 2003, filed with the SEC on September 19, 2003.

Item 11. Executive Compensation

     The information  required by this Item is incorporated  herein by reference
to our definitive Proxy Statement to be filed in connection with the 2004 Annual
Meeting of Stockholders.

Item 12. Security Ownership of Certain Beneficial Owners and Management and
         Related Stockholder Matters

     The information required by this Item, except for the information regarding
securities  authorized for issuance under equity compensation plans which is set
forth in Item 5 of this  report,  is  incorporated  herein by  reference  to our
definitive  Proxy  Statement  to be filed  in  connection  with the 2004  Annual
Meeting of Stockholders.

Item 13. Certain Relationships and Related Transactions

     The information  required by this Item is incorporated  herein by reference
to our definitive Proxy Statement to be filed in connection with the 2004 Annual
Meeting of Stockholders.

Item 14. Principal Accountant Fees and Services

     The information  required by this Item is incorporated  herein by reference
to our definitive Proxy Statement to be filed in connection with the 2004 Annual
Meeting of Stockholders.

                                      -50-

<PAGE>

                                     PART IV

Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
<TABLE>
                                                                                             Page Number of
                                                                                             Annual Report
                                                                                              on Form 10-K
(a) List of Documents filed as part of this Report
        <S>                                                                                   <C>
        (1)   Financial Statements

        Report of Independent Auditors                                                             27

        Consolidated Balance Sheets as of June 30, 2004 and 2003                                   28

        Consolidated Statements of Operations
            Years ended June 30, 2004, 2003 and 2002                                               29

        Consolidated Statements of Cash Flows
            Years ended June 30, 2004, 2003 and 2002                                               30

        Consolidated Statements of Stockholders' Equity
            Years ended June 30, 2004, 2003 and 2002                                               31

        Notes to Consolidated Financial Statements                                                 32

        (2)   Financial Statement Schedules

        Consolidated Financial Statements Schedules as of and for
            Years ended June 30, 2004, 2003 and 2002

        Schedule II:  Valuation and Qualifying Accounts                                            48

        All other Financial Statements Schedules have been omitted because they
        are not required or are not applicable.

</TABLE>

                                      -51-
<PAGE>
<TABLE>

(3)     Exhibits (Numbered in accordance with Item 601 of Regulation S-K).
<S>      <C>
3.1      Certificate of  Incorporation  of the Company.  (Incorporated  by reference to Exhibit 3.1 to the
         Company's  Registration  Statement on Form S-1, Registration No. 33-72128,  filed with the SEC on
         November 24, 1993.)
3.2      Certificate of Amendment of Certificate of Incorporation dated February
         2, 1995 decreasing aggregate number of authorized shares to 12,179,985.
         (Incorporated by reference to Exhibit 3.2 to the Company's Annual
         Report on Form 10-K for the fiscal year ended June 30, 1995, filed with
         the SEC on December 1, 1995.)
3.3      Certificate of Designation for Series A Junior Participating Preferred
         Stock. (Incorporated by reference to Exhibit 3.3 to the Company's
         Annual Report on Form 10-K for the fiscal year ended June 30, 2000,
         filed with the SEC on September 28, 2000.)
3.4      By-laws. (Incorporated by reference to Exhibit 3.2 to the Company's
         Registration Statement on Form S-1, Registration No. 33-72128, filed
         with the SEC on November 24, 1993.)
4.1      Certificate of Incorporation. (Incorporated by reference to Exhibit 3.1
         to the Company's Registration Statement on Form S-1, Registration No.
         33-72128, filed with the SEC on November 24, 1993.)
4.2      Certificate of Amendment of Certificate of Incorporation dated February
         2, 1995 decreasing aggregate number of authorized shares to 12,179,985.
         (Incorporated by reference to Exhibit 3.2 to the Company's Annual
         Report on Form 10-K for the fiscal year ended June 30, 1995, filed with
         the SEC on December 1, 1995.)
4.3      Certificate of Designation for Series A Junior Participating Preferred
         Stock. (Incorporated by reference to Exhibit 3.3 to the Company's
         Annual Report on Form 10-K for the fiscal year ended June 30, 2000,
         filed with the SEC on September 28, 2000.)
4.4      Rights  Agreement,  dated as of July 20, 2000,  between  Celadon  Group,  Inc. and Fleet National
         Bank, as Rights Agent.  (Incorporated  by reference to Exhibit 4.1 to the Company's  Registration
         Statement on Form 8-A, filed with the SEC on July 20, 2000.)
4.5      By-laws.  (Incorporated  by reference to Exhibit 3.2 to the Company's  Registration  Statement on
         Form S-1, Registration No. 33-72128, filed with the SEC on November 24, 1993.)
10.1     Celadon  Group,  Inc.  1994 Stock  Option  Plan.  (Incorporated  by reference to Exhibit B to the
         Company's Proxy Statement on Schedule 14A, filed with the SEC October 17, 1997.) *
10.2     Employment Contract dated January 21, 1994 between the Company and
         Stephen Russell. (Incorporated by reference to Exhibit 10.43 to the
         Company's Registration Statement on Form S-1, Registration No.
         33-72128, filed with the SEC on November 24, 1993.) *
10.3     Amendment dated February 12, 1997 to Employment Contract dated January
         21, 1994 between the Company and Stephen Russell. (Incorporated by
         reference to Exhibit 10.50 to the Company's Annual Report on Form 10-K
         filed with the SEC on September 12, 1997.)
10.4     Celadon  Group,  Inc.  Non-Employee  Director  Stock Option Plan.  (Incorporated  by reference to
         Exhibit A to the Company's  Proxy  Statement on Schedule  14A,  filed with the SEC on October 14,
         1997.) *
10.5     Amendment  No. 2 dated August 1, 1997 to Employment  Contract  dated January 21, 1994 between the
         Company and  Stephen  Russell.  (Incorporated  by  reference  to Exhibit  10.54 to the  Company's
         Quarterly Report on Form 10-Q filed with the SEC on February 11, 1998.) *
10.6     Rights  Agreement,  dated as of July 20, 2000,  between  Celadon  Group,  Inc. and Fleet National
         Bank, as Rights Agent.  (Incorporated  by reference to Exhibit 4.1 to the Company's  Registration
         Statement on Form 8-A, filed with the SEC on July 20, 2000.)
10.7     Amendment  No. 3 dated July 26, 2000 to  Employment  Contract  dated January 21, 1994 between the
         Company and  Stephen  Russell.  (Incorporated  by  reference  to Exhibit  10.19 to the  Company's
         Annual Report on Form 10-K filed with the SEC on September 30, 2002.) *
10.8     Amendment  No. 4 dated April 4, 2002 to  Employment  Contract  dated January 21, 1994 between the
         Company and  Stephen  Russell.  (Incorporated  by  reference  to Exhibit  10.20 to the  Company's
         Annual Report on Form 10-K filed with the SEC on September 30, 2002.) *
10.9     Separation  Agreement dated March 3, 2000 between the Company and Paul A. Will.  (Incorporated by
         reference  to Exhibit  10.21 to the  Company's  Annual  Report on Form 10-K filed with the SEC on
         September 30, 2002.) *
10.10    Amendment dated September 30, 2001 to Separation Agreement between the
         Company and Paul A. Will dated March 3, 2000. (Incorporated by
         reference to Exhibit 10.22 to the Company's Annual Report on Form 10-K
         filed with the SEC on September 30, 2002.) *

                                      -52-
<PAGE>
10.11    Separation Agreement dated March 2, 2000 between the Company and David
         Shatto. (Incorporated by reference to Exhibit 10.23 to the Company's
         Annual Report on Form 10-K filed with the SEC on September 30, 2002.) *
10.12    Amendment dated September 30, 2001 to Separation Agreement between the
         Company and David Shatto dated March 2, 2000. (Incorporated by
         reference to Exhibit 10.24 to the Company's Annual Report on Form 10-K
         filed with the SEC on September 30, 2002.) *
10.13    Loan and Security Agreement dated September 26, 2002 among the Company,
         certain of its subsidiaries, Fleet Capital Corporation, Fleet Capital
         Canada Corporation and certain other lenders. (Incorporated by
         reference to Exhibit 10.25 to the Company's Annual Report on Form 10-K
         filed with the SEC on September 30, 2002.)
10.14    Waiver and First Amendment to Loan and Security Agreement dated January
         31, 2003 among the Company, certain of its subsidiaries, Fleet Capital
         Corporation, Fleet Capital Canada Corporation and certain other
         lenders. (Incorporated by reference to Exhibit 10.16 to the Company's
         Annual Report on Form 10-K filed with the SEC on September 19, 2003.)
10.15    Waiver and Second Amendment to Loan and Security Agreement dated April
         24, 2003 among the Company, certain of its subsidiaries, Fleet Capital
         Corporation, Fleet Capital Canada Corporation and certain other
         lenders. (Incorporated by reference to Exhibit 10.17 to the Company's
         Annual Report on Form 10-K filed with the SEC on September 19, 2003.)
10.16    Third Amendment to Loan and Security Agreement dated August 21, 2003
         among the Company, certain of its subsidiaries, Fleet Capital
         Corporation, Fleet Capital Canada Corporation and certain other
         lenders. (Incorporated by reference to Exhibit 10.18 to the Company's
         Annual Report on Form 10-K filed with the SEC on September 19, 2003.)
10.17    Amendment No. 5 dated November 20, 2002 to Employment Contract dated
         January 21, 1994 between the Company and Stephen Russell. (Incorporated
         by reference to Exhibit 10.19 to the Company's Annual Report on Form
         10-K filed with the SEC on September 19, 2003.) *
10.18    Letter of Understanding and Mutual Agreement dated July 9, 2001 between
         the Company and Sergio Hernandez Aranda. (Incorporated by reference to
         Exhibit 10.18 to the Company's Annual Report on Form 10-K/A filed with
         the SEC on May 18, 2004.) *
10.19    Fourth Amendment to Loan and Security Agreement dated January 16, 2004
         among the Company, certain of its subsidiaries, Fleet Capital
         Corporation, Fleet Capital Canada Corporation and certain other
         lenders. (Incorporated by reference to Exhibit 10.21 to the Company's
         10-Q filed with the SEC on April 29, 2004.)
10.20    Fifth Amendment to Loan and Security Agreement dated May 20, 2004 among
         the Company, certain of its subsidiaries, Fleet Capital Corporation,
         Fleet Capital Canada Corporation and certain other lenders. #
14       Celadon Group, Inc. Code of Business Conduct and Ethics adopted by the
         Company on April 30, 2003. (Incorporated by reference to Exhibit 10.20
         to the Company's Annual Report on Form 10-K filed with the SEC on
         September 19, 2003.)
21       Subsidiaries. #
23       Consent of Independent Auditors. #
31.1     Certification pursuant to Item 601(b)(31) of Regulation S-K, as adopted
         pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, by Stephen
         Russell, the Company's Chief Executive Officer. #
31.2     Certification  pursuant to Item 601(b)(31) of Regulation S-K, as adopted  pursuant to Section 302
         of the Sarbanes-Oxley Act of 2002, by Paul A. Will, the Company's Chief Financial Officer. #
32.1     Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant
         to Section 906 of the Sarbanes-Oxley Act of 2002, by Stephen Russell,
         the Company's Chief Executive Officer. #
32.2     Certification  pursuant  to 18 U.S.C.  Section  1350,  as adopted  pursuant to Section 906 of the
         Sarbanes-Oxley Act of 2002, by Paul A. Will, the Company's Chief Financial Officer. #
99.1     Private  Securities   Litigation  Reform  Act  of  1995  Safe  Harbor  Compliance  Statement  for
         Forward-Looking Statements. #
------------------
*        Management contract or compensatory plan or arrangement.
#        Filed herewith.
</TABLE>
(b)      Reports on Form 8-K.

During our fourth fiscal quarter ended June 30, 2004, we filed with, or
furnished to, the SEC the following Current Reports on Form 8-K:

                                      -53-
<PAGE>

Current Report on Form 8-K dated April 19, 2004 (furnished to the SEC on April
20, 2004) to report the issuance of a press release regarding the Company's
financial results for the quarter and nine months ended March 31, 2004;

Current Report on Form 8-K dated April 20, 2004 (furnished to the Commission on
April 22, 2004) to report certain information with respect to an investor
conference call regarding the Company's financial results for the quarter and
nine months ended March 31, 2004; and

Current Report on Form 8-K dated April 29, 2004 (furnished to the SEC on April
29, 2004) to report the issuance of a press release regarding the Company's
filing of a registration statement for a secondary offering of its common stock.

                                      -54-
<PAGE>


                                   SIGNATURES

         Pursuant to the requirements of Section 13 or 15(d) of the Exchange
Act, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized this September 13, 2004.

                       Celadon Group, Inc.

                       By: /s/ Stephen Russell
                          -----------------------
                          Stephen Russell
                          Chairman of the Board, President and
                          Chief Executive Officer

         Pursuant to the requirements of the Exchange Act, this report has been
signed below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.
<TABLE>
          Signature                                  Title                                     Date
<S>                            <C>                                                <C>
                               Chairman of the Board, President and               September 13, 2004
/s/ Stephen Russell            Chief Executive Officer
(Stephen Russell)              (Principal Executive Officer)

                               Chief Financial Officer, Treasurer, and            September 13, 2004
/s/ Paul A. Will               Asst. Secretary (Principal Financial and
(Paul A. Will)                 Accounting Officer)


/s/ Paul A. Biddelman          Director                                           September 13, 2004
(Paul A. Biddelman)

                                                                                  September 13, 2004
/s/ Michael Miller             Director
(Michael Miller)

                                                                                  September 13, 2004
/s/ Anthony Heyworth           Director
(Anthony Heyworth)

                                                                                  September 13, 2004
/s/ John Kines                 Director
(John Kines)

</TABLE>
                                      -55-