UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly period ended September 30, 1998
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-29754
AMERTRANZ WORLDWIDE HOLDING CORP.
(Exact name of registrant as specified in its charter)
Delaware 11-3309110
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
112 East 25th Street
Baltimore, Maryland 21218
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (410) 338-0127
Inapplicable
(Former name, former address and former fiscal year if changed
from last report.)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed 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
At November 12, 1998, the number of shares outstanding of the registrant's
common stock was 8,229,789.
<PAGE>
TABLE OF CONTENTS
Part I - Financial Information Page
Item 1. Financial Statements:
Consolidated Balance Sheets,
September 30, 1998 (unaudited) and
June 30, 1998 (audited) 3
Consolidated Statements of Operations
for the Three Months Ended
September 30, 1998 and 1997 (unaudited) 4
Consolidated Statements of Shareholders'
Equity for the Year Ended June 30, 1998
(audited) and the Three Months Ended
September 30, 1998 (unaudited) 5
Consolidated Statements of Cash Flows
for the Three Months Ended September 30,
1998 and 1997 (unaudited) 6
Notes to Unaudited Consolidated Financial
Statements 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 10
Part II - Other Information
Item 1. Legal Proceedings 13
Item 6. Exhibits and Reports on Form 8-K 13
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AMERTRANZ WORLDWIDE HOLDING CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, 1998 June 30, 1998
------------------ -------------
ASSETS (unaudited)
<S> <C> <C> <C> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents, including restricted cash of
$2,000,000 and $0, respectively $ 11,554,186 $ 879,797
Accounts receivable, net of allowance for doubtful
accounts of $525,901 and $514,542, respectively 8,683,276 14,555,151
Deferred income taxes -- 7,705,092
Prepaid expenses and other current assets 335,709 604,588
------------ ------------
Total current assets 20,573,171 23,744,628
PROPERTY AND EQUIPMENT, net 434,425 755,822
OTHER ASSETS 267,504 238,904
DEFERRED INCOME TAXES 184,895 184,895
GOODWILL, net of accumulated amortization of
$1,453,604 and $1,305,445, respectively 13,474,420 13,622,579
------------ ------------
Total assets $ 34,934,415 $ 38,546,828
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 3,981,058 $ 8,542,850
Accrued expenses 3,490,921 1,990,880
Accrued transportation expenses 3,379,496 3,880,195
Taxes payable 1,366,800 110,000
Reserve for restructuring 201,259 264,143
Note payable to bank 734,278 6,745,853
Note payable to affiliate -- 905,913
Notes payable to creditors -- 53,835
Current portion of long-term debt due to affiliate -- 3,332,126
Current portion of long-term debt 48,000 50,000
Dividends payable 65,328 117,524
Lease obligation-current portion 94,522 91,735
------------ ------------
Total current liabilities 13,361,662 26,085,054
LONG-TERM DEBT DUE TO AFFILIATE -- 4,000,000
LONG TERM DEBT -- 10,500
LEASE OBLIGATION--LONG-TERM 102,801 127,506
------------ ------------
Total liabilities $ 13,464,463 $ 30,223,060
------------ ------------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Preferred Stock, $10 par value; 2,500,000 shares authorized,
457,207 and 621,387 shares issued and outstanding respectively 4,572,070 6,213,870
Common stock, $.01 par value; 15,000,000 shares authorized,
8,479,094 and 8,419,094 shares issued and outstanding,
respectively 84,790 84,190
Paid-in capital 22,605,731 22,546,331
Accumulated deficit (5,781,389) (20,509,373)
Less: Treasury stock, 106,304 shares held at cost (11,250) (11,250)
------------ ------------
Total shareholders' equity 21,469,952 8,323,768
------------ ------------
Total liabilities and shareholders' equity $ 34,934,415 $ 38,546,828
============ ============
</TABLE>
The accompanying notes are an integral part of this
consolidated balance sheet.
3
<PAGE>
AMERTRANZ WORLDWIDE HOLDING CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
Three months ended September 30,
1998 1997
<S> <C> <C> <C> <C> <C> <C>
Operating revenues:
Operating revenues - Target subsidiary 9,650,938 12,351,840
Operating revenues - CAS subsidiary 1,585,776 12,366,812
--------- ----------
Operating revenues 11,236,714 24,718,652
Cost of transportation:
Cost of transportation - Target subsidiary 7,003,382 9,382,836
Cost of transportation - CAS subsidiary 1,319,730 9,593,347
--------- ---------
Cost of transportation 8,323,112 18,976,183
Gross profit:
Gross profit - Target subsidiary 2,647,556 2,969,004
Gross profit - CAS subsidiary 266,046 2,773,465
------- ---------
Gross profit 2,913,602 5,742,469
Selling, general and administrative expenses:
Selling, general and administrative expenses - Target subsidiary 2,704,809 3,162,327
Selling, general and administrative expenses - CAS subsidiary 428,347 1,458,441
Selling, general and administrative expenses - Corporate 840,476 261,587
Depreciation and amortization 195,475 229,549
------- -------
Selling, general and administrative expenses 4,169,107 5,111,904
Other income (expense):
Interest income (expense) 45,518 (364,369)
Other income (expense) 120,926 (1,191)
Gain on sale of subsidiary 24,832,353 --
---------- ----------
Income before income taxes 23,743,292 265,005
Provision for income taxes 8,955,572 35,000
--------- ------
Net income 14,787,720 230,005
========== =======
Net income per share:
Basic 1.74 0.03
==== ====
Diluted 0.96 0.01
==== ====
Weighted average shares outstanding:
Basic 8,458,877 6,944,443
========= =========
Diluted 15,356,794 11,878,662
========== ==========
</TABLE>
The accompanying notes are an integral part of this
consolidated statement.
4
<PAGE>
AMERTRANZ WORLDWIDE HOLDING CORP.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEAR ENDED JUNE 30, 1998 AND THE
THREE MONTHS ENDED SEPTEMBER 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
Additional
Preferred Stock Common Stock Paid-in Treasury Stock Accumulated
--------------- ------------ --------------
Shares Amount Shares Amount Capital Shares Amount Deficit Total
------ ------ ------ ------ ------- ------ ------ ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, June 30, 1997 498,000 $4,980,000 6,826,504 $68,265 $20,972,256 106,304($11,250)($27,439,695) ($1,430,424)
Additional costs associated with
the Private Placement - - - - - - - (34,908) (34,908)
Common stock issued in connection
with the conversion of Class A
Preferred Stock (110,250)(1,102,500) 1,102,500 11,025 1,091,475 - - - 0
Stock options exercised - - 52,590 525 (525) - - - 0
Preferred stock issued for repayment
of secured long-term debt of
Amertranz Worldwide, Inc. 100,000 1,000,000 - - - - - - 1,000,000
Preferred stock issued for the purchase
of $1,581,800 of trade debt of
Amertranz Worldwide, Inc. 158,180 1,581,800 - - - - - - 1,581,800
Common stock issued in connection
with the conversion of Class B
Preferred Stock (20,000) (200,000) 200,000 2,000 198,000 - - - 0
Common stock issued in connection
with the conversion of Class C
Preferred Stock (23,750) (237,500) 237,500 2,375 235,125 - - - 0
Preferred stock dividends associated
with the Class A Preferred Stock 12,696 126,960 (126,960) 0
Preferred Stock dividends associated
with the Class D Preferred Stock 6,511 65,110 (65,110) 0
Cash dividends associated with the
Class C Preferred Stock - - - - - - - (246,343) (246,343)
Warrants issued in connection with
the sale of the assets of CAS - - - - 50,000 - - - 50,000
Net Profit - - - - - - - 7,403,643 7,403,643
------ --------- -------- ------ --------- ------- ------ ---------- ----------
Balance, June 30, 1998 621,387 $6,213,870 8,419,094 $84,190 $22,546,331 106,304 ($11,250)($20,509,373) $8,323,768
======= ========== ========= ======= =========== ======= ======== ============ ==========
Common stock issued in connection
with the conversion of Class C
Preferred Stock (6,000) (60,000) 60,000 600 59,400 - - - 0
Cash dividends associated with the
Class C Preferred Stock - - - - - - - (59,736) (59,736)
Redemption of Class E
Preferred Stock (158,180)(1,581,800) - - - - - - (1,581,800)
Net income - - - - - - - 14,787,720 14,787,720
------ --------- -------- ------ --------- ------- ------ ---------- ----------
Balance, September 30, 1998 457,207 $4,572,070 8,479,094 $84,790 $22,605,731 106,304($11,250) ($5,781,389) $21,469,952
======= ========== ========= ======= =========== =============== =========== ===========
</TABLE>
The accompanying notes are an integral part of this consolidated statement.
5
<PAGE>
AMERTRANZ WORLDWIDE HOLDING CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended September 30,
--------------------------------
1998 1997
---- ----
<S> <C> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 14,787,720 $230,008
Bad debt expense 11,359 28,520
Depreciation and amortization 195,476 229,549
Gain on CAS sale (24,832,353) --
Deferred income tax benefit 7,705,092 --
Adjustments to reconcile net income to net cash used in operating activities-
Decrease (increase) in accounts receivable 5,860,516 (3,569,133)
Decrease in prepaid expenses and other current assets 62,626 270,810
(Increase) decrease in other assets (103,084) 51,692
(Decrease) increase in accounts payable and accrued expenses (3,998,577) 1,895,063
------------ -----------
Net cash used in operating activities (311,225) (863,491)
------------ -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (375,227) (165,793)
Proceeds from CAS sale, net of closing costs 25,762,397 --
Net cash provided by (used in) investing activities 25,387,170 (165,793)
------------ -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Additional costs relating to the Private Placement - (34,907)
Dividends paid (117,524) (12,875)
Net (repayment) borrowing from note payable to bank (6,011,575) 357,839
(Repayment) proceeds of short-term debt (3,332,126) 148,582
Repayment of long-term debt (4,012,500) (12,500)
Repayment of revolving loan due to affiliate (905,913) --
Payment of lease obligations (21,918) --
------------ -----------
Net cash (used in) provided by financing activities: (14,401,556) 446,139
------------ -----------
Net increase (decrease) in cash and cash equivalents $10,674,389 ($583,145)
CASH AND CASH EQUIVALENTS, beginning of the period 879,797 1,382,243
------------ -----------
CASH AND CASH EQUIVALENTS, end of the period $ 11,554,186 $ 799,098
============ ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash payments for:
Interest 41,741 213,005
Income taxes 107,387 9,604
</TABLE>
The accompanying notes are an integral part of this
consolidated statement.
6
<PAGE>
AMERTRANZ WORLDWIDE HOLDING CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(Unaudited)
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
<TABLE>
<CAPTION>
Three Months Ended September 30,
--------------------------------
1998 1997
---- ----
<S> <C> <C>
Redemption of 158,180 Class E Preferred Shares $ (1,581,800) -
Conversion of 6,000 Class C Preferred Shares $ (60,000) -
Issuance of Common Stock for Conversion of 6,000
Class C Preferred Shares $ 60 -
TIA, Inc. conversion of 110,250 Class A Preferred Shares - $(1,102,500)
Issuance of Common Stock for TIA, Inc. conversion of
110,250 Class A Preferred Shares $ - $ 11,025
Issuance of Common Stock for Stock Options exercised $ - $ 525
</TABLE>
The accompanying notes are an integral part of this
consolidated statement.
7
<PAGE>
AMERTRANZ WORLDWIDE HOLDING CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Notes to Unaudited Consolidated Financial Statements
The accompanying unaudited consolidated financial statements have been prepared
in accordance with the instructions for Form 10-Q and Regulation S-X related to
interim period financial statements and, therefore, do not include all
information and footnotes required by generally accepted accounting principles.
However, in the opinion of management, all adjustments (consisting of normal
recurring adjustments and accruals) considered necessary for a fair presentation
of the consolidated financial position of the Company and its subsidiaries at
September 30, 1998 and their consolidated results of operations and cash flows
for the three and nine months ended September 30, 1998 have been included. The
results of operations for the interim periods are not necessarily indicative of
the results that may be expected for the entire year. Reference should be made
to the annual financial statements, including footnotes thereto, included in the
Amertranz Worldwide Holding Corp. (the "Company") Form 10-K for the year ended
June 30, 1998.
Note 2 - Disposition of Assets
On July 13, 1998, the Company's Caribbean Air Services, Inc. ("CAS") subsidiary
sold substantially all of the operating assets of CAS to Geologistics Air
Services, Inc., an indirect wholly-owned subsidiary of Geologistics Corporation
("Geologistics"), for $27 million in cash (the "CAS Sale"), in accordance with
the terms of the Asset Purchase Agreement among the parties dated June 15, 1998
(the "Asset Purchase Agreement").
Under the terms of the Asset Purchase Agreement CAS retained its accounts
receivable. CAS realized $1.4 million from these accounts receivable after
payment of liabilities during the quarter ended September 30, 1998, and the
Company expects that CAS will realize an additional $1.7 million from these
accounts receivable after payment of the balance of its liabilities.
The Company realized a $24,832,353 pre-tax gain from the CAS Sale. This gain
resulted from sale proceeds of $27,000,000, reduced by (i) the sale of the CAS
assets at a book value of $930,044, and (ii) closing costs of $1,237,603.
Other than with respect to certain obligations pursuant to leases and other
agreements included in the assigned assets, Geologistics did not assume any
obligations of the Company or CAS.
In connection with the CAS Sale, Richard A. Faieta, a director and President of
CAS and a director and Executive Vice President to the Company became President
of Geologistics Air Services, Inc. and resigned as a director and officer of the
Company, CAS and each of the Company's other subsidiaries.
For the fiscal year ended June 30, 1998 revenues from the operations of CAS
contributed approximately $54 million to the Company's total revenues, and
income from the operations of CAS contributed approximately $4.5 to the
Company's operating income.
Note 3 - Earnings Per Share
In accordance with the requirements of SFAS No. 128, net earnings per common
share amounts ("basic EPS") were computed by dividing net earnings after
deducting preferred stock dividend requirements, by the weighted average number
of common shares outstanding and contingently issuable shares (which satisfy
certain conditions) and excluding any potential dilution. Net earnings per
common share amounts - assuming dilution ("diluted EPS") were computed by
reflecting potential dilution from the exercise of stock options. SFAS No. 128
requires the presentation of both basic EPS and diluted EPS on the face of the
income statement. Earnings per share amounts for the same prior-year periods
have been restated to conform with the provisions of SFAS No. 128.
8
<PAGE>
AMERTRANZ WORLDWIDE HOLDING CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
A reconciliation between the numerators and denominators of the basic and
diluted EPS computations for net earnings for the three months ended September
30, 1998 is as follows:
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended
September 30, 1998 September 30, 1997
---------------------------------- ----------------------------------
Income Shares Per Share Income Shares Per Share
(Numerator) (Denominator) Amounts (Numerator) (Denominator) Amounts
----------- ------------- ------- ----------- ------------- -------
<S> <C> <C>
Net earnings $14,787,720 $230,005
Preferred stock dividends (59,736) (54,000)
------- -------
BASIC EPS
Net earnings attributable to
common stock $14,727,984 8,458,877 $1.74 $176,005 6,944,443 $0.03
===== =====
EFFECT OF DILUTIVE SECURITIES
Convertible Preferred Stock 6,716,108 4,721,889
Stock options 181,809 212,330
Stock warrants 0 0
------- ---------
DILUTED EPS
Net earnings attributable to common
stock and assumed preferred
conversions and option exercises $14,727,984 15,356,794 $0.96 $176,005 11,878,662 $0.01
=========== ========== ===== ======== ========== =====
</TABLE>
Options to purchase 225,800 shares of common stock were not included in the
computation of diluted EPS because the exercise price of those options were
greater than the average market price of the common shares. As a result of the
CAS sale, 150,800 of such options were cancelled. Therefore, only 75,000 of such
options were still outstanding at the end of the period.
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
This Quarterly Report on Form 10-Q contains certain forward-looking
statements reflecting the Company's current expectations with respect to its
operations, performance, financial condition, and other developments. Such
statements are necessarily estimates reflecting the Company's best judgement
based upon current information and involve a number of risks and uncertainties.
While it is impossible to identify all such factors, factors which could cause
actual results to differ materially from expectations are: (i) the Company's
historical operating losses and ability to sustain recent profitability
following the CAS Sale, (ii) the Company's ability to increase operating
revenue, improve gross profit margins and reduce selling, general and
administrative costs, (iii) competitive practices in the industries in which the
Company competes, (iv) the Company's dependence on current management, (v) the
impact of current and future laws and governmental regulations affecting the
transportation industry in general and the Company's operations in particular,
(vi) general economic conditions, and (vii) other factors which may be
identified from time to time in the Company's Securities and Exchange Commission
filings and other public announcements. There can be no assurance that these and
other factors will not affect the accuracy of such forward-looking statements.
Forward-looking statements are preceded by an asterisk (*).
OVERVIEW
The Company was incorporated in January 1996 to continue the freight
forwarding business of TIA, Inc. ("TIA") and Caribbean Freight System, Inc.
("CFS") and acquire Amertranz Worldwide, Inc. ("Amertranz"). The Company
generated operating revenues of $97.8 million, $75.4 million, and $27.4 million,
and had a net profit of $7.4 million, and net losses of $10.5 million, and $6.4
million, for the fiscal years ended June 30, 1998 and 1997 and the six months
ended June 30, 1996, respectively. The fiscal year 1998 profit includes a $7.6
million net income tax benefit arising from the CAS Sale which closed on July
13, 1998, and the fiscal year 1997 loss included a charge of $3.4 million
attributed to restructuring costs in connection with the closing of the
Company's Amertranz subsidiary. The Company had consolidated earnings (losses)
before interest, taxes, depreciation and amortization (EBITDA) of approximately
$2.6 million, ($8.3 million), and ($2.0 million), for the fiscal years ended
June 30, 1998 and 1997 and the six months ended June 30, 1996, respectively.
Because of continuing losses in the Company's Amertranz subsidiary for
each of its operating periods, on June 23, 1997 the Company's Amertranz
subsidiary ceased operations and transferred its customer accounts to the
Company's Target subsidiary for fair consideration.
* Following the closing of the Amertranz subsidiary, the Company
determined that it would be in the best interests of the Company and its
shareholders to deleverage the Company's balance sheet and create the cash
resources needed to grow the Company's freight forwarding and logistics
business. While the Company's CAS subsidiary has been historically profitable,
management determined that this strategy can best be accomplished by the sale of
the operations of its CAS subsidiary. On July 13, 1998, the Company's CAS
subsidiary sold substantially all of its operating assets to a subsidiary of
Geologistics Corporation for $27 million in cash pursuant to the terms of an
Asset Purchase Agreement dated June 15, 1998. As a result of the CAS Sale, the
Company deleveraged its balance sheet by repaying approximately $15 million in
outstanding liabilities and obtained required working capital to take advantage
of growth opportunities available to the Company's Target subsidiary. These
opportunities include improved vendor pricing and attracting quality personnel
and agents on a world-wide basis, which the Company believes will drive its
future profitability. In addition, the Company may consider strategic
acquisitions. There can be no assurance that this strategy to increase
profitability will be successful.
* Management believes that the results of the Company's operations for
the three months ended September 30, 1998 (all but 12 days of which were
following the CAS Sale) indicate management's concentrated focus on Target's
business together with the Company's available resources following the CAS Sale
will enable the Company to achieve the intended growth. While Target's gross
freight revenues were down in the current quarter from the corresponding 1997
period, the reduction was mostly due to the elimination of unprofitable sources
of revenues. For the quarter ended September 30, 1998, Target's gross profit
margin (i.e., gross freight revenues less cost of transportation expressed as a
percentage of gross freight revenue) improved to 27.4% from 24.0% for the
10
<PAGE>
corresponding period of 1997, a 14.2% improvement. This increased margin
accounts for approximately $328,000 of Target's gross profit. Management intends
to continue to work on improving Target's gross profit margins while focusing on
increasing operating revenue by adding quality sales personnel and independent
agents and reducing fixed selling, general and administrative costs to improve
the Company's net income.
RESULTS OF OPERATIONS
The following discussion relates to the combined results of operation
of the Company for the three month period ended September 30, 1998, compared to
results of operation for the three month period ended September 30, 1997.
Three Months ended September 30, 1998 and 1997
Operating Revenue. Operating revenue decreased to $11.2 million for the
three months ended September 30, 1998 from $24.7 million for the three months
ended September 30, 1997, a 54.6% decrease. Of this decrease, 80% resulted from
the inclusion of CAS's operating revenue for the full 1997 period but only for
12 days of the 1998 period due to the CAS Sale on July 13, 1998. The balance of
this decrease occurred within the operations of the Company's Target Airfreight,
Inc. ("Target") subsidiary where operating revenue decreased to $9,650,938 for
the three months ended September 30, 1998 from $12,351,840 for the corresponding
1997 period, a 21.9% decrease. This decrease in Target's operating revenue is
the result of the elimination of unprofitable sources of revenue in order to
improve Target's operating results.
Cost of Transportation. Cost of transportation was 74.1% of operating
revenue for the three months ended September 30, 1998, and 76.8% of operating
revenue for the three months ended September 30, 1997. This decrease is due to
(i) a reduction in Target's cost of transportation as a percentage of sales
(72.6% for the 1998 period, from 76.0% for the 1997 period), and (ii) the
historically higher cost of transportation for the Company's CAS subsidiary than
the Company's Target subsidiary.
Gross Profit. As a result of the factors described in the previous
paragraph, gross profit for the three months ended September 30, 1998 increased
to 25.9% of operating revenue from 23.2% of operating revenue for the three
months ended September 30, 1997.
Within the Company's Target subsidiary, gross profit margin increased
to 27.4% from 24.0% for the three months ended September 30, 1998 and 1997,
respectively. This increase in gross profit margin accounts for approximately
$328,000 of Target's gross profit for the three months ended September 30, 1998.
Target's actual gross profit decreased by $321,448, to $2,647,556 for the three
months ended September 30, 1998 from $2,969,004 for the three months ended
September 30, 1997. This decrease is a function of lower operating revenue as
explained above.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses were 37.1% of operating revenue (30.7% excluding
non-recurring expenses explained in (ii) and (iii), below) for the three months
ended September 30, 1998, and 20.7% of operating revenue for the three months
ended September 30, 1997. This increase was primarily due to (i) the
historically lower selling, general and administrative expenses as a percentage
of sales for the CAS subsidiary than the Target subsidiary; (ii) non-recurring
expenses of $104,119 incurred in the 1998 period to wind down the Company's CAS
subsidiary (primarily, the collection of accounts receivable and payment of
accounts payable); and (iii) the non-recurring accrual in the 1998 period
(reflected within "Selling, general and administrative expenses - Corporate") of
executive bonus compensation of $619,015 as a result of the CAS Sale.
Within the Company's Target subsidiary, selling, general and
administrative expenses were 28.0% for the three months ended September 30, 1998
and 25.6% for the period ended September 30, 1997. This increase is primarily
due to a constant level of fixed costs despite a reduction in operating revenue
and a corresponding reduction in variable selling, general and administrative
expenses.
11
<PAGE>
Net Income. The Company realized net income of $14,787,720 for the
three months ended September 30, 1998, compared to a net income of $230,005 for
the three months ended September 30, 1997. This increase was due to the CAS
Sale.
The Company had consolidated earnings (losses) before interest, taxes,
depreciation and amortization ("EBITDA") of approximately $23,893,000 and
$860,000 for the three months ended September 30, 1998 and 1997, respectively.
EBITDA, excluding earnings from the CAS Sale and the non-recurring expenses
explained under "Selling, general, and administrative expenses", above, was
approximately ($216,000) for the three months ended September 30, 1998.
LIQUIDITY AND CAPITAL RESOURCES
General. During the three months ended September 30, 1998, net cash
used in operating activities was $311,000. Cash provided by investing activities
was $25,387,000, which consisted of net proceeds in connection with the CAS Sale
totaling $25,762,000, less capital expenditures of $375,000. Cash used in
financing activities was $14,402,000, which primarily consisted of the repayment
of long and short term debt and the purchase of subsidiaries' long and short
term debt.
Following the closing of the Company's Amertranz subsidiary, the
Company entered into an Extension and Composition Agreement dated as of November
7, 1997 with certain general unsecured creditors of the Company's Amertranz
subsidiary, whereby $1,581,799 of trade debt of the Amertranz subsidiary was
acquired by the Company in exchange for the issuance of 158,180 shares of the
Company's Class E Preferred Stock. On September 24, 1998 the Company announced
the redemption of the Class E Preferred Shares. The Company has reserved
$1,581,799 for this redemption.
Currently, approximately $1.7 million of the Company's outstanding
accounts payable represent unsecured trade payables of the Company's closed
Amertranz subsidiary.
Capital expenditures. Capital expenditures for the three months ended
September 30, 1998 were $375,227.
* Working Capital Requirements. Cash needs of the Company are currently
met by funds generated from operations, the Company's accounts receivable
financing facility, and funds remaining from the CAS Sale. As of September 30,
1998, the Company had $1,794,000 available under its $10 million accounts
receivable financing facility and approximately $11,554,000 from operations and
remaining proceeds from the CAS Sale. The Company believes that its current
financial resources will be sufficient to finance its operations and obligations
for the long and short term. However, the Company's actual working capital needs
for the long and short terms will depend upon numerous factors, including the
Company's operating results, the cost of increasing the Company's sales and
marketing activities, and competition, none of which can be predicted with
certainty.
12
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company has previously reported in its Annual Report on Form 10-K
for the fiscal year ended June 30, 1998, that on June 15, 1998, the Company was
served with a complaint filed in the United States District Court for the
Eastern District of New York (case number CV 98 3777), by Martin Hoffenberg, a
former consultant to the Company. The Company, its Amertranz, Target, and CAS
subsidiaries, Stuart Hettleman (president and a director of the Company),
Richard A. Faieta (a former officer and director of the Company), and two
principal shareholders of the Company, are named defendants in the lawsuit. The
complaint is based on events occurring prior to February 1996, when Mr.
Hoffenberg controlled the Amertranz subsidiary as its president and chairman,
and on events occurring subsequent thereto, when Mr. Hoffenberg served as a
consultant to the Company. The complaint alleges breach of contract, violations
of the federal anti-racketeering laws, fraud, and failure to pay wages and
benefits. The complaint seeks economic damages in excess of $5.6 million, and
punitive damages of $7.5 million. The Company intends to vigorously defend the
action. The Company believes that the complaint is without merit and that any
material recovery by Mr. Hoffenberg is unlikely. No material developments have
occurred in this litigation since first reported.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
Exhibit No.
3.1 Certificate of Incorporation of Registrant, as amended (incorporated by
reference to Exhibit 3.1 to the Registrant's Annual Report on Form 10-K
for the Fiscal Year Ended June 30, 1998, File No. 0-29754)
3.2 By-Laws of Registrant, as amended (incorporated by reference to Exhibit
3.2 to the Registrant's Quarterly Report on Form 10-Q for the Quarter
Ended March 31, 1998, File No. 0-29754)
4.1 Warrant Agent Agreement (incorporated by reference to Exhibit 4.3 to
the Registrant's Registration Statement on Form S-1, Registration No.
333-03613)
4.2 Form of Amendment No. 1 to Warrant Agent Agreement dated June 13, 1997
(incorporated by reference to Exhibit 4.7 to the Registrant's
Registration Statement on Form S-1, Registration No. 333-30351)
4.3 Certificate of Designations with respect to the Registrant's Class A
Preferred Stock (contained in Exhibit 3.1)
4.4 Certificate of Designations with respect to the Registrant's Class B
Preferred Stock (contained in Exhibit 3.1)
4.5 Certificate of Designations with respect to the Registrant's Class C
Preferred Stock (contained in Exhibit 3.1)
4.6 Certificate of Designations with respect to the Registrant's Class D
Preferred Stock (contained in Exhibit 3.1)
4.7 Certificate of Designations with respect to the Registrant's Class E
Preferred Stock (contained in Exhibit 3.1)
10.1 1996 Stock Option Plan (incorporated by reference to Exhibit 10.1 to
the Registrant's Quarterly Report on Form 10-Q for the Quarter Ended
December 31, 1997, File No. 0-29754)
10.2 Accounts Receivable Management and Security Agreement, dated January
16, 1997 by and between BNY Financial Corp., as Lender, and Amertranz
Worldwide, Inc., Caribbean Air Services, Inc., and Consolidated Air
Services, Inc., as Borrowers, and guaranteed by Amertranz Worldwide
Holding Corp. ("BNY Facility Agreement") (incorporated by reference to
Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for the
Quarter Ended March 31, 1997, File No. 0-29754)
10.3 Letter Amendment to BNY Facility Agreement, dated April 16, 1997 ("BNY
Letter Amendment") (incorporated by reference to Exhibit 10.2 to the
Registrant's Quarterly Report on Form 10-Q for the Quarter Ended March
31, 1997, File No. 0-29754)
13
<PAGE>
10.4 Shadow Warrant entered into in connection with the BNY Letter Amendment
(incorporated by reference to Exhibit 10.3 to the Registrant's
Quarterly Report on Form 10-Q for the Quarter Ended March 31, 1997,
File No. 0-29754)
10.5 Letter Amendment to BNY Facility Agreement, dated September 25, 1997
(incorporated by reference to Exhibit 10.5 to the Registrant's Annual
Report on Form 10-K for the Year Ended June 30, 1997, File No.
0-29754)
10.6 Loan and Security Agreement dated October 25,1995 between Amertranz
Worldwide, Inc. and TIA, Inc., as amended January 24, 1996
(incorporated by reference to Exhibit 10.5 to the Registrant's
Registration Statement on Form S-1, Registration No. 333-03613)
10.7 Form of Amended and Restated Promissory Note of Amertranz Worldwide,
Inc. payable to TIA, Inc. in principal amount of $800,000 (incorporated
by reference to Exhibit 10.6 to the Registrant's Registration Statement
on Form S-1, Registration No. 333-03613)
10.8 Revolving Credit Promissory Note dated February 7, 1996 of Caribbean
Air Services, Inc. payable to TIA, Inc. and Caribbean Freight System,
Inc. in the principal amount of $4,000,000 (incorporated by reference
to Exhibit 10.9 to the Registrant's Registration Statement on Form S-1,
Registration No. 333-03613)
10.9 Promissory Note dated February 7, 1996 of Amertranz Worldwide Holding
Corp. payable to TIA, Inc. and Caribbean Freight System, Inc. in the
principal amount of $10,000,000 (incorporated by reference to Exhibit
10.10 to the Registrant's Registration Statement on Form S-1,
Registration No. 333-03613)
10.10 Employment Agreement dated June 24, 1996 between Amertranz Worldwide
Holding Corp. and Stuart Hettleman (incorporated by reference to
Exhibit 10.13 to the Registrant's Annual Report on Form 10-K for the
Fiscal Year Ended June 30, 1996, File No. 0-29754)
10.11 Employment Agreement dated June 24, 1996 between Amertranz Worldwide
Holding Corp. and Richard A. Faieta (incorporated by reference to
Exhibit 10.14 to the Registrant's Annual Report on Form 10-K for the
Fiscal Year Ended June 30, 1996, File No. 0-29754)
10.12 Cargo Aircraft Charter Agreement dated February 28, 1994 between TIA,
Inc. and Florida West Airlines, Inc., as amended and assigned November
29, 1995 (incorporated by reference to Exhibit 10.15 to the
Registrant's Registration Statement on Form S-1, Registration No.
333-03613)
10.13 Asset Purchase Agreement dated as of June 15, 1998, by and among
Amertranz Worldwide Holding Corp., Caribbean Air Services, Inc., and
Geologistics Corporation (incorporated by reference to Exhibit 2.1 to
the Registrant's Current Report on Form 8-K, dated July 13, 1998, File
No. 0-29754)
10.14 Lease Agreement dated August 7, 1990 between S Partners and Caribbean
Freight System, Inc. for the premises at 7001 Cessna Drive, Greensboro,
North Carolina, as amended and extended April 9, 1994 (incorporated by
reference to Exhibit 10.17 to the Registrant's Registration Statement
on Form S-1, Registration No. 333-03613)
10.15(P) Lease Agreement for Los Angeles Facility (incorporated by reference to
Exhibit 10.17 to the Registrant's Annual Report on Form 10-K for the
Year Ended June 30, 1997, File No. 0-29754)
27 Financial Data Schedule
(b) Reports on Form 8-K:
On July 27, 1998, the Registrant filed a current Report on
Form 8-K, dated July 13, 1998, reporting the sale of substantially all
of the assets of the Registrant's Caribbean Air Services, Inc.
subsidiary to a subsidiary of Geologistics Corporation.
14
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: November 12, 1998 AMERTRANZ WORLDWIDE HOLDING CORP.
Registrant
/s/ Stuart Hettleman
---------------------
President, Chief Executive Officer
/s/ Philip J. Dubato
---------------------
Vice President, Chief Financial Officer
C75407B.198
15
<PAGE>
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<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
financial statements as of and for the period ended September 30, 1998 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
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<NAME> AMERTRANZ WORLDWIDE HOLDING CORP.
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4,572
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