<PAGE>
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, 1996
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
--------------------- --------------------
Commission File No.: 0-5206
EMONS TRANSPORTATION GROUP, INC.
(Exact name of registrant as specified in its charter)
Delaware 23-2441662
----------------------------------------------------
(State of incorporation) (I.R.S. employer identification number)
96 South George Street, York, PA 17401
-------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (717) 771-1700
Securities registered pursuant to Section 12 (b) of the Act:
None
Securities registered pursuant to Section 12 (g) of the Act:
Common Stock, $.01 Par Value
$.14 Series A Cumulative Convertible Preferred Stock, $.01 Par Value
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
--------- --------
As of September 9, 1996, 5,705,689 shares of voting Common Stock were
outstanding including 2,835,432 shares held by an escrow agent. For information
regarding the escrow agent, see "Industries Reorganization" below. The aggregate
market value of shares of voting Common Stock held by nonaffiliates of the
registrant as of September 9, 1996 was $13,469,446. For this purpose the average
of the closing bid and asked prices ($2.56 per share), as of September 9, 1996,
has been used.
Documents incorporated by reference: Proxy Statement
1
<PAGE>
Part I
Item 1. Business
Emons Transportation Group, Inc. ("Emons Transportation Group"), a
Delaware corporation headquartered in York, Pennsylvania, is a freight
transportation and distribution services company serving the Mid-Atlantic and
Northeast regions of the United States. The Company owns three shortline
railroads, operates rail/truck transload and warehouse facilities, operates a
rail intermodal terminal in Auburn, Maine, and provides customers with logistics
services for the movement and storage of freight. Emons Transportation Group was
organized in December 1986 and is the owner of all of the outstanding capital
stock of Emons Industries, Inc. ("Industries"), the Maryland and Pennsylvania
Railroad Company ("MPA"), Emons Logistics Services, Inc. ("Logistics"), Maine
Intermodal Transportation, Inc. ("MIT") and Emons Railroad Group, Inc.
("Railroad Group") which owns all of the outstanding capital stock of Yorkrail,
Inc. ("YKR") and the St. Lawrence & Atlantic Railroad Company ("SLR"). Prior to
the formation of Emons Transportation Group in December 1986, Industries, which
was formed in 1955, was the parent company. For information regarding the
formation of Emons Transportation Group, see "Industries Reorganization" below.
Unless the context otherwise requires, the terms "Emons" and the
"Company" when used herein shall refer to Emons Transportation Group, Inc. and
its consolidated subsidiaries. The Company's executive offices are located at
96 S. George Street, York, Pennsylvania 17401 (Telephone 717-771-1700).
Description of Operations
The Company owns and operates three short-line railroads, MPA, YKR and
SLR. The revenues from these three short-line railroad operations accounted for
86% of the Company's total operating revenues in fiscal 1996, 89% of total
operating revenues in fiscal 1995, and 93% of total operating revenues in fiscal
1994. The Company also owns and operates a logistics services business in York,
Pennsylvania, and a rail intermodal terminal in Auburn, Maine. These operations
are intended to supplement the Company's railroad operations by providing a wide
variety of value added services including warehousing and other distribution
services and options to businesses located both on and off of the Company's rail
lines.
The Company's operations are organized into two separate and distinct
business units, the Pennsylvania Business Unit and the New England Business
Unit. The Pennsylvania Business Unit is comprised of MPA, YKR and Logistics,
located in York, Pennsylvania. The New England Business Unit is comprised of SLR
which extends from Portland, Maine through New Hampshire to Norton, Vermont, and
MIT which commenced rail intermodal operations on SLR in Auburn, Maine in
September 1994. Each Business Unit has a complete management team on location
headed by a senior executive responsible for the operations and financial
performance of their respective Business Unit.
Pennsylvania Business Unit
--------------------------
MPA, located in York, Pennsylvania, owns 26 miles of mainline track and
related properties. There are approximately 30 active customers that utilize
MPA's service for in-bound and/or out-bound shipments of freight, including
approximately 20 customers located directly on line. MPA primarily serves
customers in the paper, building products and distribution industries. MPA's
largest customer, P. H. Glatfelter Company, a paper manufacturer, accounted for
approximately 48% of MPA's operating revenues in fiscal 1996. MPA interchanges
rail traffic with Consolidated Rail Corporation ("Conrail") and YKR at York
Pennsylvania, and CSX Transportation, Inc. ("CSXT") at Hanover, Pennsylvania.
On February 17, 1989, YKR acquired 16 miles of mainline track and
related properties from CSXT in and around York, Pennsylvania and commenced
operations on that date. YKR serves approximately 30 active customers, including
approximately 20 customers located directly on line. YKR primarily serves
customers in the paper, agricultural, building products and distribution
industries. YKR's largest customer, P. H. Glatfelter Company, accounted for 16%
of YKR's fiscal 1996 operating revenues. YKR interchanges rail traffic with CSXT
at Porters Sideling, Pennsylvania, MPA at York, Pennsylvania, and Conrail at
West York, Pennsylvania.
2
<PAGE>
During fiscal 1990, the Company formed Emons Logistics Services, Inc.
and began offering certain logistics services for customers in the Mid-Atlantic
region from its facilities in York, Pennsylvania. Logistics currently operates
seven facilities located either on MPA or YKR which allow manufacturers and
users of canned goods, lumber and other building products, packaged consumer
products, steel, paper products, and dry/liquid bulk commodities to take
advantage of favorable rail economics for the long haul shipment of their
products combined with truck delivery to companies that are not located on a
rail line. The Company provides both short and long term storage, various value
added services, plus rail/truck transfer and truck brokering services for its
customers. These operations generate revenues for the Company both for the
logistics services performed and for the movement of freight by rail. The
Company believes that these operations are critical to the growth of the
railroad operations of the Pennsylvania Business Unit since they enable
customers who are not located directly on line to utilize rail transportation.
During fiscal 1990, the Company built a 15,000 square foot building
located on MPA that provides rail/truck transfer and storage for the
distribution of canned goods and certain building products. In fiscal 1995, the
Company made improvements to the facility to accommodate 65,000 square feet of
outside storage of products, particularly lumber and steel pipe. The Company has
arrangements with two major western rail carriers to provide short term storage
and rail/truck transfer services as their designated agent for the Mid-Atlantic
and Northeast regions of the United States.
In fiscal 1990, the Company also developed another site located on MPA
for rail/truck transfer and storage to handle such items as structural steel,
pipe and lumber. This facility encompasses 70,000 square feet including 25,000
square feet under roof for inside storage and an outside paved storage area. The
facility is currently utilized for the transfer and storage of building
products, structural steel and aggregates.
In May 1991, in cooperation with CSXT, the Company opened a bulk
rail/truck transfer facility on YKR to service manufacturers and users of dry
and liquid bulk commodities. This facility operates under the trade name
Food-Linc and handles bulk food grade and related products such as vegetable
oils and plastic pellets. In July 1992, a second such facility was developed
named Chem-Linc to handle bulk products such as industrial oils and chemicals.
Collectively, these operations are referred to as Emons BIDS (Bulk Intermodal
Distribution Services). Other transfer facilities were opened during fiscal 1993
and 1994 which transload various bulk products primarily for the agricultural
industry at this location and at the Company's two railroad trestles located in
downtown York, Pennsylvania.
The Company also operates three other leased warehouse facilities. The
first facility is located on YKR in Thomasville, Pennsylvania and consists of
approximately 26,000 square feet. The Company has commitments for the handling
and short term storage of finished paper (newsprint, pulpboard and printing
paper) at this location. A second warehouse, also located on YKR in central
York, Pennsylvania, is a 50,000 square foot facility which is utilized for
storage of both finished paper and woodpulp. Another warehouse facility in
Hanover, Pennsylvania, consisting of approximately 25,000 square feet, is
utilized primarily for the storage of other types of fibre stock for use by a
local paper manufacturer. The products transferred and stored at these locations
originate throughout North America for truck distribution to states within the
Mid-Atlantic and Northeast regions of the United States.
In August 1995, the Company purchased 23 acres of land adjacent to
existing rail operations on YKR, and constructed a dedicated lumber reload
facility on approximately 5 acres. A contract has been signed with a major
Canadian forest products company to provide lumber transload and storage
services to serve major accounts throughout the Mid-Atlantic region. The Company
expects to utilize the remainder of this land for the continued development of
transload and distribution business in the York, Pennsylvania area.
3
<PAGE>
New England Business Unit
-------------------------
On May 19, 1989, SLR acquired certain rail properties previously known
as the Grand Trunk Eastern Lines from the Canadian National Railway ("CN"). This
rail line consists of approximately 165 miles of mainline track and related
properties between Portland, Maine and Norton, Vermont. SLR serves approximately
55 customers, including 18 customers located directly on line. SLR primarily
serves customers in the paper, construction, agricultural, energy, warehousing
and distribution industries. SLR's major customers, New England Public
Warehouse, Champion International Paper Corporation and Crown Vantage (formerly
James River Corporation) accounted for 17%, 10% and 10% of SLR's operating
revenues in fiscal 1996, respectively. SLR interchanges rail traffic with CN at
Island Pond, Vermont, the Springfield Terminal Railway at Danville Junction,
Maine and Portland, Maine (via Danville Junction), the New Hampshire and Vermont
Railroad at Groveton, New Hampshire, the Berlin Mills Railway at both Berlin and
Gorham, New Hampshire, and the New Hampshire Central Railroad at North
Stratford, New Hampshire.
The MIT rail intermodal terminal located on SLR in Auburn, Maine
commenced operations in September 1994. The development and construction of this
operation was a cooperative project between the Company, the State of Maine, the
City of Auburn and CN North America. The $2.9 million cost of the terminal
facilities was funded 80% by the State of Maine with federal funds under the
ISTEA legislation (Intermodal Surface Transportation Efficiency Act) and 20% by
the City of Auburn. The City of Auburn owns the terminal and leases it to MIT
under a long term lease arrangement which includes an initial term of 20 years,
three 10 year renewal options and a purchase option in year 50. The terminal
includes 42 acres of land (16 acres currently developed in Phase I), three
double-ended working tracks for loading, unloading and storage of intermodal
railcars, lighted parking for trailers and containers, a gate house, a truck
scale, a trailer/container maintenance facility and various other improvements.
The Company believes that this operation will be an important factor in the
growth and development of SLR by providing additional business volume to SLR's
railroad operation.
Through coordinated train service between CN North America and SLR, MIT
offers premier rail intermodal service which includes third morning service
between Auburn and Chicago on dedicated intermodal trains transporting railcars
and containers. Service is also provided to and from points in Canada by CN and
throughout North America by other connecting rail carriers.
MIT operations are conducted by an independent contractor, In-Terminal
Services (a subsidiary of Mi-Jack Products), who currently operates over 40
intermodal terminals in North America.
Employees
At June 30, 1996, the Company employed a total of 143 persons, 79 of
which were represented by various labor organizations. The Company has labor
agreements with all unions which represent MPA and SLR employees. The Company is
currently in the process of renegotiating agreements with various unions
representing MPA and SLR employees, which expired on December 31, 1995 and May
18, 1996, respectively. Employees of the remainder of the Company's operations
are not represented by labor organizations. The Company has not experienced any
work stoppages and considers its employee relations to be satisfactory.
Regulation
The Company's rail subsidiaries are subject to the regulatory
jurisdiction of the Surface Transportation Board ("STB"), successor to the
Interstate Commerce Commission ("ICC"). The STB has jurisdiction over, among
other things, the rates charged, the issuance of securities and the extension or
abandonment of rail lines, routes or service by common carriers, and the
consolidation, merger and acquisition of control of and by such carriers. The
Company's rail subsidiaries are also subject to regulation by the Federal
Railroad Administration as to safety requirements and operating practices, and
subject to regulations by governmental authorities of Pennsylvania, Maine,
Vermont and New Hampshire.
4
<PAGE>
Competition
The railroad freight operations of the Company and railroad industry in
general experience price and service competition from other railroads, highway
motor carriers and various water carriers in the movement of goods and products.
Industries' Reorganization
Prior to 1986, the Company provided management, leasing and brokerage
services for rail transportation equipment. In response to a severe decline in
the boxcar leasing business, in March 1984 Industries filed a petition for
reorganization under Chapter 11 of the United States Bankruptcy Code. In
December 1986 the Bankruptcy Court for the Southern District of New York (the
"Bankruptcy Court") confirmed Industries' Reorganization Plan ( the "Plan") and
Emons Transportation Group became the parent of Industries and MPA.
Under the Plan, each unsecured creditor received an initial
distribution of cash, Common Stock and Senior Preferred Stock for its claim.
Since numerous disputed claims remained at the time of consummation of the Plan,
an escrow agent appointed in connection with the Plan was instructed to
distribute additional amounts of cash and securities to holders of allowed
claims on a quarterly basis in each quarter that disputed claims are reduced by
litigation or settlement. The Bankruptcy Court has postponed the distribution of
any cash and securities until it is determined whether certain other potential
unsecured claims should be included in the Bankruptcy proceeding. The escrow
agent currently holds 2,835,432 shares of Common Stock and 1,204,890 shares of
$.14 Series A Cumulative Convertible Preferred Stock. The escrow agent has the
right to vote the shares held by it and has expressed its intention generally to
vote such shares proportionally in accordance with the vote cast by unaffiliated
stockholders.
5
<PAGE>
Item 2. Properties
With respect to material properties owned or leased by the Company, the
following table sets forth the location of the property, the approximate square
feet of space, miles of railroad track or acreage, and use made of such
facilities. All properties are owned by the Company except as otherwise noted,
are in good condition, adequately fulfill the Company's requirements and are
being used to the fullest extent necessary for the Company's operations.
<TABLE>
<CAPTION>
Approximate
Square
Feet of
Address Space Use
---------------------- ---------- --------------------------------------------
<S> <C> <C>
96 South George Street 5,907 Executive and administrative offices and
York, PA (1) Pennsylvania Business Unit administrative
offices
East Princess Street 70,000 Rail/truck transfer and storage facility for
York, PA building products, steel and aggregates
West Market Street 40,000 Rail/truck transfer facility for bulk food
York, PA grade products
West Market Street 20,000 Rail/truck transfer facility for chemicals
York, PA and non-food bulk products
Queen and Hay Street 80,000 Rail/truck transfer and warehouse facility
York, PA for canned goods, packaged consumer
products, lumber and steel pipe
Beaver and North Street 7,500 Rail/truck transfer facility for
York, PA agricultural products
Poplar Street 25,000 Warehouse facility for woodpulp storage and
Hanover, PA (1) distribution
Commerce Drive 26,250 Rail/truck transfer and warehouse facility
Thomasville, PA (1) for paper products storage and distribution
Arch Street 7,500 Rail/truck transfer facility for aggregates
York, PA and fertilizer
Loucks Mill Road 50,000 Warehouse facility for transfer and storage
York, PA (1) of paper products
Lewiston Junction Road 4,000 New England Business Unit administrative
Auburn, ME (1) offices
Lewiston Junction Road 106,700 Locomotive repair facility
Auburn, ME (3)
Princess Street 15,000 Locomotive repair facility
York, PA
Island Pond, VT (2) 295,000 Rail/truck transfer, storage and
distribution facility for lumber
</TABLE>
(1) Leased from a third party.
(2) Leased to a third party.
(3) Land portion leased from a third party.
6
<PAGE>
<TABLE>
<CAPTION>
Acreage or
Approximate
Address Distance Use
----------------------- ----------- ------------------------------------------
<S> <C> <C>
Lewiston Junction Road 42 acres Rail intermodal terminal
Auburn, ME (1)
Portland, ME to 165 miles Mainline railroad trackage plus rail yards
Norton, VT and related facilities
Auburn, ME (1) 4 miles Branch railroad trackage
West Market Street 23 acres Includes 5 acre rail/truck transfer and
West York, PA storage facility for lumber
York, PA to 26 miles Mainline railroad trackage plus rail yards
Hanover, PA and related facilities
York, PA to Porters 16 miles Mainline railroad trackage plus rail yards
Sideling, PA and related facilities
</TABLE>
(1) Leased from a third party.
(2) Leased to a third party.
(3) Land portion leased from a third party.
7
<PAGE>
Item 3. Legal Proceedings
Emons Transportation Group is not a party to any legal proceedings.
However, Emons Industries, a subsidiary of the Company, is currently a defendant
in 539 product liability actions. The Company is in the process of cleaning up a
fuel oil leak at its locomotive maintenance facility in York, Pennsylvania.
Product Liability Actions
-------------------------
Prior to March 1971, under previous management, Industries (then known
as Amfre-Grant, Inc.) was engaged in the business of distributing (but not
manufacturing) various generic and prescription drugs. Industries sold and
discontinued these business activities in March 1971 and commenced its railcar
leasing and railroad operations in October 1971. One of the drugs which had been
distributed was diethylstilbestrol ("DES") which was taken by women during
pregnancy to prevent miscarriage.
As of September 5, 1996, Industries was one of numerous defendants
(including many of the largest pharmaceutical manufacturers) in 539 lawsuits in
which the plaintiffs allege that DES caused adenosis, infertility, cancer or
birth defects in the offspring or grandchildren of women who ingested DES during
pregnancy. In these actions, liability is premised on the defendant's
participation in the market for DES, and liability is several and limited to the
defendant's share of the market. Of these lawsuits, 533 were commenced after the
confirmation of Industries' Reorganization Plan in December 1986 (the "Plan"),
while the remaining 6 lawsuits are claims which will be treated under the Plan.
In one action, Industries is allegedly identified as the sole defendant. These
actions are currently in various stages of litigation.
Industries has filed a motion in Bankruptcy Court seeking a judgment
declaring that the 533 post-confirmation lawsuits represent claims which should
be asserted against Industries' Chapter 11 estate and are not
post-reorganization liabilities. Counsel has advised the Company that the
Bankruptcy Court should grant Industries' application to classify all of these
cases as bankruptcy claims. In addition, on February 14, 1995, the Bankruptcy
Court advised Industries that it would sign an order which would stay execution
of any judgment rendered against Industries pending determination of Industries'
application. The order, which was submitted to the Court on March 23, 1995, has
not yet been signed.
Industries has product liability insurance and defense coverage for
nearly all the claims which fall within the policy period 1948 to 1970 up to
varying limits by individual and in the aggregate for each policy year. To date,
Industries has not exhausted coverage in any policy year. During the period July
1, 1995 through September 12, 1996, 157 lawsuits were settled or dismissed at no
material liability to Industries. These settlements included 7 cases in which a
jury in New York State court had rendered awards in January 1994 prior to the
establishment of causation by plaintiffs. Industries' potential liability in
these cases totaled approximately $260,000, of which approximately $62,000 would
be paid by Industries' insurer. These cases were settled as bankruptcy claims at
no liability to Industries.
Management intends to vigorously defend all of these actions. In the
event that the post-reorganization lawsuits described above are not treated
under the Plan, it is possible that Industries could ultimately have liability
in these actions in excess of its product liability insurance coverage described
above. However, based on Industries' experience in prior DES litigation and its
current knowledge of pending cases, the Company believes that it is unlikely
that Industries' ultimate liability, if any, in excess of insurance coverage and
existing reserves in the pending cases will be in an amount sufficient to have a
material adverse effect upon the Company's consolidated financial position or
results of operations.
8
<PAGE>
Environmental Liability
-----------------------
During fiscal 1994, the Company discovered a diesel fuel oil leak at
its locomotive maintenance facility in York, Pennsylvania resulting from the
fueling of its locomotives. The Company is currently working with the
Pennsylvania Department of Environmental Protection to clean up the contaminated
area. Based upon information currently available, the Company believes it has
provided adequate reserves as of June 30, 1996 for the estimated clean up costs.
Item 4. Submission of Matters to a Vote of Security Holders
NONE
Part II
Item 5. Market for Company's Common Equity and Related Stockholder Matters
<TABLE>
<CAPTION>
COMMON STOCK PRICE RANGE
------------------------
Fiscal Year Fiscal Quarter High Bid Low Bid
----------- -------------- -------- -------
<S> <C> <C>
1996 First $ 6.50 $ 1.00
Second 2.625 1.625
Third 2.00 1.50
Fourth 1.9375 1.0625
1995 First $ 1.00 $ 0.9375
Second 1.0625 1.00
Third 1.125 1.00
Fourth 1.00 1.00
</TABLE>
At September 9, 1996, the Company had 5,705,689 shares of Common Stock
issued and outstanding which were held by approximately 1,442 Stockholders of
record. Such shares are traded in the over-the-counter securities market and are
listed on NASDAQ under the symbol EMON. No cash dividends have been paid on the
Common Stock and no cash dividends are expected to be paid on the Common Stock
in the foreseeable future.
As of September 9, 1996, 1,680,230 shares of $.14 Series A Cumulative
Convertible Preferred Stock were issued and outstanding which were held by
approximately 277 Stockholders of record. The holders of the $.14 Series A
Cumulative Convertible Preferred Stock are entitled to a dividend of $.14 per
share per annum which is to be paid semi-annually. The Board of Directors voted
to omit the regular semi-annual dividend which would have been payable from the
period January 2, 1991 through July 1, 1996. Dividends in arrears as of
September 9, 1996 aggregated $1,411,393. These shares are traded in the
over-the-counter securities market.
9
<PAGE>
Item 6. Selected Financial Data
EMONS TRANSPORTATION GROUP, INC. AND SUBSIDIARIES
Selected Financial Data
For the Five Years ended June 30, 1996
(Not Covered by Independent Auditors' Report)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
1996 1995 1994 1993 1992
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Operating revenues $14,917,077 $13,996,608 $ 11,994,286 $ 11,551,839 $ 10,978,574
=========== =========== ============ ============ ============
Income (loss) from operations $ 1,627,339 $ 2,073,724 $ 811,164 $ 1,322,045 $ (656,891)
=========== =========== ============ ============ ============
Income (loss) before cumulative effect
of change in accounting principle $ 469,501 $ 766,077 $ (184,325) $ 135,688 $ (1,960,444)
Cumulative effect of change in accounting
principle for income taxes (1) -- -- (750,000) -- --
----------- ----------- ------------ ------------ ------------
Net income (loss) $ 469,501 $ 766,077 $ (934,325) $ 135,688 $ (1,960,444)
=========== =========== ============ ============ ============
Earnings (loss) per common share
and common share equivalent:
Earnings (loss) before cumulative effect
of change in accounting principle $ 0.04 $ 0.09 $ (0.08) $ (0.02) $ (0.41)
Cumulative effect of change in
accounting principle for income taxes -- -- (0.13) -- --
----------- ----------- ------------ ------------ ------------
Net income (loss) $ 0.04 $ 0.09 $ (0.21) $ (0.02) $ (0.41)
=========== =========== ============ ============ ============
Total assets $22,789,914 $20,745,575 $ 19,844,423 $ 20,575,690 $ 21,473,186
=========== =========== ============ ============ ============
Debt $11,086,009 $10,862,098 $ 11,047,433 $ 12,439,150 $ 13,279,894
=========== =========== ============ ============ ============
</TABLE>
(1) See Note 2 to the Consolidated Financial Statements for the Years ended
June 30, 1996, 1995 and 1994.
10
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Liquidity and Capital Resources
The Company's primary sources of liquidity include its cash and
accounts receivable, which aggregated $3,670,000 and $3,004,000 at June 30, 1996
and 1995, respectively, and the balance available under a $750,000 Senior
Secured Term Loan issued by a local bank to a subsidiary. Under the original
terms of the Loan Agreement, the Company could borrow up to $750,000 through
March 1, 1996, at which time the principal amount borrowed is repayable over a
five year period. In August 1995, the Company borrowed $200,000 under this loan
to finance the acquisition of land and construction of a new logistics lumber
transload and storage facility in York, Pennsylvania to accommodate a new
customer. In April 1996, the bank extended the remaining balance of $550,000
available under this facility through June 1997. The Company borrowed an
additional $225,000 in August 1996 to finance the acquisition of locomotives,
and intends to use the balance remaining under this Agreement to finance other
projects to generate additional business and to fund capital track
rehabilitation projects as needed.
The Company's cash and cash equivalents increased $33,000 for the year
ended June 30, 1996. The net increase includes $2,430,000 of cash provided by
operations, $180,000 of proceeds from the disposal of property and equipment,
and $224,000 of additional net borrowings, partially offset by $2,801,000 of
capital investments.
The Company generated $2,430,000 of cash from operations for the year
ended June 30, 1996 as compared to $1,897,000 for the prior year. Excluding
working capital items and other assets and liabilities, cash provided by
operations decreased $263,000 from $2,108,000 for the year ended June 30, 1995
to $1,845,000 for the current year. This decrease is primarily attributable to a
decrease in net income of $297,000 in fiscal 1996 as compared to the prior year.
Cash provided by working capital items and other assets and liabilities
totaled $585,000 for the year ended June 30, 1996, consisting principally of a
$1,096,000 increase in accounts payable and accrued expenses, and a $155,000
decrease in materials and supplies, partially offset by a $634,000 increase in
accounts receivable. The fluctuations in these account balances relate primarily
to the increased level of capital track activities, and related government
funding, in the latter part of fiscal 1996 as compared to the prior year, and
the growth in the Company's other operating activities over the prior year.
The Company invested $2,801,000 in capital expenditures during the year
ended June 30, 1996. Expenditures include $2,181,000 in railroad track
structures (net of $933,000 of government grants) in connection with the
Company's continuing extensive track rehabilitation program, $372,000 for land
and improvements in connection with the construction of a logistics lumber
transload and storage facility in York, PA, and $76,000 for computer equipment
in connection with a computer systems upgrade project. The Company currently has
approximately $1.2 million of government grants and $1.4 million of government
funding under no or low interest loan programs available for future track
rehabilitation projects.
Proceeds from the disposal of property and equipment were generated
from the sale of non-essential real estate including miscellaneous parcels of
land and a railroad station in Berlin, New Hampshire, and insurance proceeds for
a locomotive which was destroyed in a derailment incident.
The Company's net long-term debt obligations increased $224,000 during
fiscal 1996 including $802,000 of scheduled debt repayments offset by $1,026,000
of additional borrowings. Additional borrowings include $170,000 of seller
financing and $200,000 of borrowings under the $750,000 Senior Secured Term Loan
to fund the acquisition of land and construction of the new logistics lumber
transfer and storage facility, $508,000 of borrowings under government no or low
interest loan track rehabilitation programs, and $148,000 of borrowings under
equipment financing arrangements.
11
<PAGE>
Fiscal 1996 as compared to Fiscal 1995
Results of Operations
The Company generated net income of $470,000 for the year ended June
30, 1996 as compared to net income of $766,000 for the year ended June 30, 1995.
Income before income taxes decreased $315,000 from $1,074,000 for fiscal 1995 to
$759,000 for fiscal 1996. The net decrease includes a $1,367,000 increase in
operating expenses, partially offset by $920,000 additional operating revenues,
$80,000 additional non-operating income, and a $39,000 decrease in interest
expense. Operating results for the year ended June 30, 1996 include the
favorable settlement of disputed local business taxes to the City of York,
Pennsylvania in the amount of $117,000 pertaining to fiscal years 1988 through
1995, consisting of $85,000 of taxes and $32,000 of accrued interest thereon.
Operating results for the year ended June 30, 1995 included two significant
transactions. First, the Company recorded a $223,000 favorable retroactive
pricing adjustment for the St. Lawrence & Atlantic Railroad ("SLR") negotiated
with the Canadian National Railway ("CN") for the period July 1, 1992 through
September 30, 1994, $158,000 of which was attributable to periods prior to
fiscal 1995. Second, the Company provided $84,000 for expenses associated with
the relocation of SLR personnel and SLR's administrative offices located in
Berlin, New Hampshire to Auburn, Maine. The provision for income taxes decreased
$18,000 from the prior year.
Revenues
Operating revenues increased $920,000, or 6.6%, from $13,997,000 for
year ended June 30, 1995 to $14,917,000 for the year ended June 30, 1996. This
net increase includes $343,000 additional freight and haulage revenues
(excluding intermodal freight), $322,000 additional intermodal freight and
handling revenues, and $268,000 additional logistics revenues, partially offset
by $13,000 less other operating revenues.
Freight and haulage revenues increased $343,000, or 3.5%, consisting of
a 5% increase in the number of carloads handled offset by a 1.3% decrease in
average revenues per carload. The total number of carloads handled increased
approximately 1,650 carloads from 32,900 for the year ended June 30, 1995 to
34,550 for the current year. The net increase includes approximately 800
additional carloads generated by the Company's logistics operations, 600
additional coal carloads (six unit coal trains), 550 additional carloads to a
warehouse customer, 450 additional agricultural carloads, and 400 additional
bridge carloads all in York, Pennsylvania, and approximately 700 additional
paper related carloads on SLR. The significant increase in business on SLR for
the current year is attributable to a strike on CN which occurred in fiscal
1995, as well as the favorable impact of sales and marketing efforts despite
unfavorable market conditions in the paper industry in the second half of fiscal
1996. These increases were partially offset by over 850 fewer carloads to a
paper manufacturer in York, Pennsylvania as a result of pulp and paper market
conditions, 300 fewer mini-train limestone shuttle carloads in York,
Pennsylvania, and a variety of other less significant decreases. The 1.3%
decrease in average revenues per carload is attributable to the mix of business
which includes a greater percentage of lower rated bridge carloads and reduced
pricing on incremental SLR paper carloads in order to attract this business.
The Company's rail intermodal terminal, which commenced operations on
SLR in late September 1994, generated $322,000 additional freight and intermodal
handling revenues in fiscal 1996 as compared to the prior year. The terminal
handled approximately 8,600 trailers and containers during fiscal 1996 as
compared to 3,650 trailers and containers during approximately nine months of
operations in fiscal 1995.
Total logistics revenues generated by the Company's operations in York,
Pennsylvania increased $268,000, or 23.6%, in fiscal 1996 over the prior year.
This increase includes in excess of a 30% increase in the number of railcars
handled and an additional $247,000 of storage revenues as a result of the
expansion of warehousing services. These increases were partially offset by
$140,000 less truck brokerage revenues and $60,000 less canned goods transfer
services due to a reduction in cross dock transfer business. In addition, the
Company's
12
<PAGE>
logistics operations accounted for approximately $530,000 freight and haulage
revenues for the railroad operations in York, Pennsylvania during the current
year as compared to $365,000 in the prior year.
The $13,000 net decrease in other operating revenues from the prior
year includes a $82,000 increase in demurrage revenues and a $68,000 increase in
car hire revenues generated under railcar leasing arrangements, offset by the
$158,000 SLR pricing adjustment recorded in the prior year.
Non-operating income increased $80,000 over the prior year due to net
gains on the sale of non-essential real estate including miscellaneous parcels
of land and a railroad station in Berlin, New Hampshire.
Expenses
Operating expenses increased $1,367,000, or 11.5%, from $11,923,000 for
the year ended June 30, 1995 to $13,290,000 for the year ended June 30, 1996.
The net increase consists of $1,226,000 additional cost of operations and
$141,000 additional selling and administrative expenses.
Cost of operations increased $1,226,000, or 13%, from $9,295,000 for
the year ended June 30, 1995 to $10,521,000 for the current year. The net
increase includes $821,000 additional railroad operating expenses, $226,000
additional logistics operating expenses, and $179,000 additional intermodal
operating expenses.
The increase in railroad operating expenses includes additional
transportation costs to operate the dedicated intermodal train on SLR for a full
year in fiscal 1996 as compared to approximately nine months in the prior year,
additional costs to operate six additional unit coal trains on the railroad
operations in York, Pennsylvania in the current year, and additional costs to
handle the remainder of the increase in carload volume. Maintenance of way
expenses also increased over the prior year including additional costs incurred
by SLR to repair the washout of a section of track resulting from a heavy
downpour in November 1995, and costs incurred to clear a fire lane in Maine.
Maintenance of way and transportation expenses, and to a lesser extent,
locomotive maintenance expenses, were also unfavorably impacted on all three of
the Company's railroad operations by the early snowfall and cold weather in the
Mid-Atlantic and Northeast regions during November and December 1995 as compared
to the prior year, and more significantly, by the continued impact of
unfavorable winter weather conditions in these regions during the third quarter
of fiscal 1996 as compared to mild winter weather conditions in the third
quarter of the prior year. The unusually heavy snowfall and cold temperatures
required additional labor costs, fuel usage and other operating expenses in
order to keep the railroad tracks clear and train operations running. In
addition, expenses in the third quarter of the prior year were lower as a result
of efforts to reduce expenses on SLR in anticipation of and during the CN labor
strike which took place in March 1995.
The increases in logistics and rail intermodal operating expenses are
attributable to the corresponding increases in the level of business in each of
these operations, including a full twelve months of intermodal operations in the
current year as compared to approximately nine months of operations in the prior
year. The increase in logistics operating expenses were partially offset by a
$129,000 reduction in brokered freight expense due to a reduction in cross dock
transfer business.
Selling and administrative expenses increased $141,000, or 5.4%, from
$2,628,000 for the year ended June 30, 1995 to $2,769,000 for the year ended
June 30, 1996. The net increase includes approximately $192,000 additional wages
and benefits as a result of wage adjustments effective January 1, 1996 and staff
additions to accommodate increased business levels, $93,000 additional
intermodal sales and administrative expenses as a result of twelve months of
operations in the current year versus nine months of operations in the prior
year, and $100,000 additional professional fees and travel expenses to pursue
potential business opportunities. These increases were partially offset by the
favorable settlement of disputed local business taxes to the City of York,
Pennsylvania in the amount of $85,000 pertaining to
13
<PAGE>
fiscal years 1988 through 1995, which was recorded as a reduction of expense in
the current year, and a net decrease in a variety of other expense categories.
Interest expense decreased $39,000 in fiscal 1996 as compared to the
prior year due to a $32,000 reduction of interest expense recorded in the
current year as a result of the favorable settlement of disputed local business
taxes to the City of York, Pennsylvania pertaining to fiscal years 1988 through
1995.
The provision for income taxes decreased $18,000 from $308,000 for the
year ended June 30, 1995 to $290,000 for the year ended June 30, 1996 as a
result of a reduction in pre-tax income. The effective tax rate increased from
29% in the prior year to 38% in the current year due to deferred tax liabilities
associated with depreciation of the Company's railroad track structures and the
significant amount of capital trackwork performed in fiscal 1996, partially
offset by limited tax assets recognized for net operating loss carryforwards in
fiscal 1996.
Fiscal 1995 as compared to Fiscal 1994
Results of Operations
The Company generated income before cumulative effect of change in
accounting principle of $766,000 for the year ended June 30, 1995 as compared to
a loss of $184,000 for the year ended June 30, 1994. Income before income taxes
increased $1,067,000 from $7,000 for fiscal 1994 to $1,074,000 for fiscal 1995.
The net increase includes an increase in operating revenues of $2,003,000,
partially offset by an increase in operating expenses of $740,000, and a
decrease in non-operating income of $194,000. The provision for income taxes
increased $117,000 over fiscal 1994.
Revenues
Operating revenues increased $2,003,000, or 17%, from $11,994,000 for
the year ended June 30, 1994 to $13,997,000 for the year ended June 30, 1995.
This increase includes $451,000 additional freight and haulage revenues
(excluding intermodal haulage revenues), $623,000 of revenues generated by the
Company's new intermodal operations on SLR in Auburn, Maine, $587,000 additional
logistics revenues, and a net $342,000 additional other operating revenues.
Freight and haulage revenues increased $451,000, or 5%, as a result of
a corresponding 5% increase in the number of freight carloads handled. The total
number of carloads handled increased by approximately 1,500 carloads from 31,400
for fiscal 1994 to 32,900 for fiscal 1995. This net increase includes 730
additional carloads resulting from the York, Pennsylvania mini-train limestone
shuttle service established in December 1993, 330 additional paper related
carloads on SLR as a result of marketing efforts and a recovery in the paper
industry, 500 additional carloads generated by the Company's logistics
operations in York, Pennsylvania, and a net increase in a variety of other
business as a result of marketing efforts and more favorable economic
conditions. These increases were partially offset by 890 less agricultural
related carloads in York, Pennsylvania as a result of competitive pricing and
local supply conditions. In addition, freight operations on SLR were adversely
affected during the third quarter of fiscal 1995 by the strike threat and actual
strike by the employees of CN, which lasted approximately 10 days during March
1995, and resulted in a decrease of 280 carloads handled by SLR during this
quarter as compared to the prior year.
Maine Intermodal Transportation, Inc. ("MIT"), the Company's rail
intermodal terminal on SLR which commenced operations in September 1994,
generated $623,000 of revenues in fiscal 1995, including $326,000 of intermodal
handling revenues and $297,000 of haulage revenues for SLR.
Logistics revenues increased $587,000, or over 100%, in fiscal 1995
over the prior year. This increase reflects the addition of two significant new
customers and the expansion of other logistics services, including warehousing.
In addition, the Company's logistics operations
14
<PAGE>
accounted for approximately $365,000 of freight and haulage revenues for the
Company's Pennsylvania railroad operations during fiscal 1995 as compared to
$280,000 in the prior year.
The net $342,000 increase in other operating revenues includes a
$223,000 retroactive SLR pricing adjustment to CN for the period July 1, 1992
through September 30, 1994 and $248,000 additional demurrage revenues, partially
offset by a $162,000 decrease in railcar leasing revenues as a result of the
sale of the Company's fleet of 75 railcars in November 1993.
The gain on the sale of the Company's fleet of 75 railcars in fiscal
1994 accounts for the major portion of the decrease in non-operating income of
$194,000 in fiscal 1995 from the prior year.
Expenses
Operating expenses increased $740,000, or 7%, from $11,183,000 for the
year ended June 30, 1994 to $11,923,000 for the year ended June 30, 1995. The
increase includes $421,000 additional cost of operations and $319,000 additional
selling administrative expenses.
Cost of operations increased $421,000, or 5%, from $8,874,000 for the
year ended June 30, 1994 to $9,295,000 for the year ended June 30, 1995. The net
increase includes $568,000 additional expenses associated with the Company's
logistics operations in York, Pennsylvania as a result of the continued growth
of this business, and $209,000 of operating expenses associated with the
Company's new intermodal operations in Auburn, Maine. These increases were
offset by a $240,000 net decrease in railroad operating expenses and a $118,000
decrease in railcar leasing expenses related to the Company's fleet of 75
railcars which were sold in November 1993.
The net decrease in railroad operating expenses of $240,000 includes an
increase in transportation expenses of almost $700,000, offset by decreases in
maintenance of way, locomotive maintenance, and other railroad operating
expenses. The increase in transportation expenses is attributable to additional
labor, fuel, railcar equipment rental, and other operating expenses associated
with running additional trains to handle new and incremental business, including
the SLR intermodal train, the York, Pennsylvania mini-train limestone shuttle,
and an additional local switching train on SLR to handle increased traffic in
the Auburn, Maine area. In addition, car hire expense increased $86,000 in
conjunction with the significant increase in demurrage revenues. The decrease in
maintenance of way expenses is the result of a significant increase in capital
track projects in the current year which are capitalized versus routine
maintenance activities which are charged to expense. Gross investment in capital
track programs increased by over $1.3 million during fiscal 1995 as compared to
the prior year. The decrease in locomotive maintenance expenses is the result of
more extensive scheduled locomotive preservation and enhancement projects in
fiscal 1994 as compared to fiscal 1995, and a $75,000 charge in the fourth
quarter of fiscal 1994 for the anticipated clean up costs associated with a fuel
leak at the Company's locomotive maintenance facility in York, Pennsylvania. All
railroad operating expenses benefited from favorable winter weather conditions
in fiscal 1995 versus 1994, and by actions taken to reduce operating expenses on
SLR during the CN labor strike in fiscal 1995.
The $568,000 increase in logistics operating expenses includes
additional labor and related costs, property and equipment rent, brokered
freight and numerous other operating expenses associated with the continued
expansion of this business in York, Pennsylvania.
Selling and administrative expenses increased $319,000, or 14%, from
$2,309,000 for the year ended June 30, 1994 to $2,628,000 for the year ended
June 30, 1995. The increase includes $131,000 of sales and marketing expenses
associated with MIT, $130,000 additional other labor and related costs, $84,000
of expenses provided for the relocation of SLR personnel and SLR's
administrative offices located in Berlin, New Hampshire to Auburn, Maine, a
$50,000 provision under incentive compensation and profit sharing plans, and a
$28,000 investment in new marketing brochures. These increases were partially
offset by a $108,000
15
<PAGE>
provision for a York City Business Privilege Tax assessment recorded in the
prior year relating to fiscal years 1988 through 1993, which remained under
contention, and a $60,000 reduction in legal fees.
Interest expense increased $18,000 in fiscal 1995 as compared to the
prior year due to the significant increase in interest rates during fiscal 1995
associated with variable interest rate debt, partially offset by a decrease in
the average interest bearing debt balance outstanding.
The provision for income taxes increased by $117,000 for fiscal 1995 as
compared to fiscal 1994 due to the significant improvement in operating results
and additional deferred tax liabilities associated with depreciation of the
Company's railroad track structures. The provision for income taxes for the year
ended June 30, 1994 includes approximately $50,000 of state income taxes
associated with the $182,000 gain on the sale of the Company's fleet of 75
railcars in November 1993.
Item 8. Financial Statements and Supplementary Data
Financial Statements and the notes and schedules thereto are listed
under Item 14 hereof.
Item 9. Change in and Disagreements with Accountants on Accounting and
Financial Disclosure
NONE
Part III
Items 10 through 13 have been omitted. A definitive proxy statement will be
filed by the Company not later than 120 days after the close of its fiscal year.
16
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULES
The Board of Directors
Emons Transportation Group, Inc.:
We have audited in accordance with generally accepted auditing standards, the
consolidated financial statements of Emons Transportation Group, Inc. and
Subsidiaries included in this Form 10-K, and have issued our report thereon
dated September 5, 1996. Our audit was made for the purpose of forming an
opinion on those statements taken as a whole. The financial statement schedules
referred to in Item 14 are the responsibility of the Company's management and
are presented for purposes of complying with the Securities and Exchange
Commission's rules and are not part of the basic financial statements. The
financial statement schedules have been subjected to the auditing procedures
applied in the audits of the basic financial statements and, in our opinion,
fairly state in all material respects the financial data required to be set
forth therein in relation to the basic financial statements taken as a whole.
Our report on the consolidated financial statements includes an explanatory
paragraph with respect to the change in the method of accounting for income
taxes as discussed in Note 2 to the consolidated financial statements.
Lancaster, PA
September 5, 1996
17
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors
Emons Transportation Group, Inc.:
We have audited the accompanying consolidated balance sheets of Emons
Transportation Group, Inc. and Subsidiaries as of June 30, 1996 and 1995, and
the related consolidated statements of operations, stockholders' equity and cash
flows for each of the three years in the period ended June 30, 1996. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. 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 financial position of Emons Transportation
Group, Inc. and Subsidiaries as of June 30, 1996 and 1995, and the results of
their operations and their cash flows for each of the three years in the period
ended June 30, 1996 in conformity with generally accepted accounting principles.
As explained in Note 2 to the financial statements, effective July 1, 1993, the
Company changed its method of accounting for income taxes.
Lancaster, PA
September 5, 1996
18
<PAGE>
Part IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(Index to Financial Statements and Schedules)
<TABLE>
<CAPTION>
Page
----
<S> <C>
(a) (1) Financial Statements of Emons Transportation Group, Inc. and
Subsidiaries:
Consolidated Balance Sheets as of June 30, 1996 and 1995 20
Consolidated Statements of Operations for the years ended
June 30, 1996, 1995 and 1994 21
Consolidated Statements of Stockholders' Equity for the
years ended June 30, 1996, 1995 and 1994 22
Consolidated Statements of Cash Flows for the years
ended June 30, 1996, 1995 and 1994 23
Notes to Consolidated Financial Statements 24
(2) Schedules Applicable to Consolidated Financial Statements:
Schedule III - Financial Statements of Emons Transportation Group, Inc.
(Parent Company Only)
Balance Sheets as of June 30, 1996 and 1995 33
Statements of Operations for the years ended June 30, 1996, 1995 and 1994 34
Statements of Cash Flows for the years ended June 30, 1996, 1995 and 1994 35
All other schedules are omitted as the required information is not
applicable or information is presented in the financial statements or
related notes.
(b) No reports on Form 8-K were filed during the quarter ended June 30, 1996.
(c) A list of exhibits can be found on page 37 hereof.
</TABLE>
19
<PAGE>
EMONS TRANSPORTATION GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
as of June 30, 1996 and 1995
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
1996 1995
- ----------------------------------------------------------------------------------------------------------------
ASSETS
Current Assets:
<S> <C> <C>
Cash and cash equivalents $ 1,265,373 $ 1,232,859
Accounts receivable, less allowance of
$76,899 in 1996 and $94,060 in 1995 2,404,730 1,770,681
Materials and supplies 204,656 359,385
Prepaid expenses 339,523 285,436
Deferred income taxes (Notes 2 and 6) 79,000 50,000
------------ ------------
Total current assets 4,293,282 3,698,361
------------ ------------
Property, plant and equipment, net (Note 1) 18,252,452 16,684,947
Deferred expenses and other assets 244,180 362,267
------------ ------------
TOTAL ASSETS $ 22,789,914 $ 20,745,575
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $ 967,837 $ 818,813
Accounts payable 1,806,969 708,234
Accrued payroll and related expenses 876,472 849,867
Income taxes payable 84,108 88,573
Other accrued expenses 1,203,876 1,228,765
------------ ------------
Total current liabilities 4,939,262 3,694,252
------------ ------------
Long-term debt (Note 3) 10,118,172 10,043,285
Other liabilities 600,861 601,722
Deferred income taxes (Notes 2 and 6) 1,513,000 1,290,000
------------ ------------
Total Liabilities 17,171,295 15,629,259
------------ ------------
Commitments and contingencies (Notes 4 and 10) -- --
Stockholders' Equity:
Preferred stock, authorized 3,000,000 shares
$0.14 Series A Cumulative Convertible Preferred Stock,
$0.01 par value, issued and outstanding 1,680,230 and
1,726,950 shares at June 30, 1996 and 1995, respectively
(redeemable at Company's option, involuntary liquidation
value of $2.00 per share)(Note 5) 16,802 17,270
Common stock, $0.01 par value, authorized 11,000,000
shares, issued and outstanding 5,703,689 and 5,669,643
shares at June 30, 1996 and 1995, respectively 57,037 56,696
Additional paid-in capital 23,281,993 23,289,866
Deficit (17,562,914) (18,032,415)
------------ ------------
5,792,918 5,331,417
Unearned compensation - restricted stock awards (174,299) (215,101)
------------ ------------
Total Stockholders' Equity 5,618,619 5,116,316
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 22,789,914 $ 20,745,575
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
20
<PAGE>
EMONS TRANSPORTATION GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
for the years ended June 30, 1996, 1995 and 1994
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating revenues $ 14,917,077 $ 13,996,608 $ 11,994,286
Operating expenses:
Cost of operations 10,521,232 9,295,039 8,874,046
Selling and administrative 2,768,506 2,627,845 2,309,076
------------ ------------ ------------
Total operating expenses 13,289,738 11,922,884 11,183,122
------------ ------------ ------------
Income from operations 1,627,339 2,073,724 811,164
Other income (expense):
Interest income 74,827 62,123 45,808
Interest expense (1,025,175) (1,063,939) (1,046,313)
Other, net 82,010 2,469 196,016
------------ ------------ ------------
Total other income (expense) (868,338) (999,347) (804,489)
------------ ------------ ------------
Income before income taxes and cumulative
effect of change in accounting principle 759,001 1,074,377 6,675
Provision for income taxes (Note 6) 289,500 308,300 191,000
------------ ------------ ------------
Income (loss) before cumulative effect of
change in accounting principle 469,501 766,077 (184,325)
Cumulative effect of change in accounting
principle for income taxes (Note 2) - - (750,000)
------------ ------------ ------------
Net income (loss) 469,501 766,077 (934,325)
Preferred dividend requirements (Note 9) 237,757 241,773 241,781
------------ ------------ ------------
Income (loss) applicable to common shareholders $ 231,744 $ 524,304 $ (1,176,106)
============ ============ ============
Average common shares and common
share equivalents (Note 7) 6,072,221 5,805,373 5,663,413
============ ============ ============
Earnings (loss) per common share and common share equivalent (Note 7):
Income (loss) before cumulative effect of
change in accounting principle $ 0.04 $ 0.09 $ (0.08)
Cumulative effect of change in accounting
principle for income taxes - - (0.13)
------------ ------------ ------------
Net income (loss) $ 0.04 $ 0.09 $ (0.21)
============ ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
21
<PAGE>
EMONS TRANSPORTATION GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
for the years ended June 30, 1996, 1995 and 1994
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
Cumulative
Convertible
Preferred Stock Common Stock
-------------------------------- -------------------------------------
Shares Amount Shares Amount
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance at June 30, 1993 1,727,006 $ 17,270 5,619,193 $ 56,192
Stock issued under restricted
stock plan - - 71,500 715
Cancellation of restricted
stock issued - - (600) (6)
Amortization of unearned
compensation - - - -
Net loss - - - -
------------ ------------ ------------ ------------
Balance at June 30, 1994 1,727,006 17,270 5,690,093 56,901
Conversion of preferred stock (56) - 50 -
Stock issued under restricted
stock plan - - 17,000 170
Cancellation of restricted
stock issued - - (37,500) (375)
Amortization of unearned
compensation - - - -
Net income - - - -
------------ ------------ ------------ ------------
Balance at June 30, 1995 1,726,950 17,270 5,669,643 56,696
Conversion of preferred stock (46,720) (468) 42,046 421
Cancellation of restricted
stock issued - - (8,000) (80)
Amortization of unearned
compensation - - - -
Net income - - - -
------------ ------------ ------------ ------------
Balance at June 30, 1996 1,680,230 $ 16,802 5,703,689 $ 57,037
============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Unearned
Additional Retained Compensation
Paid-in Earnings Restricted Stockholders'
Capital (Deficit) Stock Awards Equity
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance at June 30, 1993 $ 23,224,695 $(17,864,167) $ (201,263) $ 5,232,727
Stock issued under restricted
stock plan 70,785 - (71,500) -
Cancellation of restricted
stock issued (444) - 450 -
Amortization of unearned
compensation - - 20,924 20,924
Net loss - (934,325) - (934,325)
-------------- -------------- ------------- ------------
Balance at June 30, 1994 23,295,036 (18,798,492) (251,389) 4,319,326
Conversion of preferred stock - - - -
Stock issued under restricted
stock plan 17,893 - (18,063) -
Cancellation of restricted
stock issued (23,063) - 23,438 -
Amortization of unearned
compensation - - 30,913 30,913
Net income - 766,077 - 766,077
------------- -------------- ------------- ------------
Balance at June 30, 1995 23,289,866 (18,032,415) (215,101) 5,116,316
Conversion of preferred stock 47 - - -
Cancellation of restricted
stock issued (7,920) - 8,000 -
Amortization of unearned
compensation - - 32,802 32,802
Net income - 469,501 - 469,501
------------ -------------- ------------- ------------
Balance at June 30, 1996 $ 23,281,993 $(17,562,914) $ (174,299) $ 5,618,619
============ ============= ============= ============
</TABLE>
See accompanying notes to consolidated financial statements.
22
<PAGE>
EMONS TRANSPORTATION GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the years ended June 30, 1996, 1995 and 1994
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
1996 1995 1994
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flow from operating activities:
Net income (loss) $ 469,501 $ 766,077 $ (934,325)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Cumulative effect of change in accounting
principle for income taxes - - 750,000
Depreciation 1,136,301 1,022,467 1,167,363
Amortization 127,201 120,078 81,965
Gain on sale of assets (82,010) (3,638) (196,016)
Increase in deferred income taxes 194,000 203,000 11,000
Changes in assets and liabilities:
Accounts receivable, materials and
supplies and prepaid expenses (533,407) (265,712) (182,501)
Accounts payable and accrued expenses 1,095,986 (79,675) 798,774
Other assets and liabilities, net 22,827 134,067 (290,723)
------------ ------------ ------------
Net cash provided by operating activities 2,430,399 1,896,664 1,205,537
------------ ------------ ------------
Cash flow from investing activities:
Proceeds from sale of assets 179,586 9,762 935,512
Additions to property, plant and equipment (2,801,382) (2,053,395) (1,031,467)
------------ ------------ ------------
Net cash used in investing activities (2,621,796) (2,043,633) (95,955)
------------ ------------ ------------
Cash flow from financing activities:
Proceeds from issuance of long-term debt 1,025,775 472,647 188,516
Reduction in long-term debt (801,864) (657,982) (1,580,233)
------------ ------------ ------------
Net cash provided by (used in) financing activities 223,911 (185,335) (1,391,717)
------------ ------------ ------------
Net increase (decrease) in cash and cash equivalents 32,514 (332,304) (282,135)
Cash and cash equivalents at beginning of period 1,232,859 1,565,163 1,847,298
------------ ------------ ------------
Cash and cash equivalents at end of period $ 1,265,373 $ 1,232,859 $ 1,565,163
============ ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
23
<PAGE>
Notes to Consolidated Financial Statements
For the Years Ended June 30, 1996, 1995 and 1994
Note 1. The Company and Summary of Significant Accounting Policies
a. The Company and Operations
--------------------------
Emons Transportation Group, Inc. ("Emons Transportation Group") is a
freight transportation and distribution services company serving the
Mid-Atlantic and Northeast regions of the United States. Emons Transportation
Group and its subsidiaries (collectively the "Company") own and operate two
short-line railroads and rail/truck transload and warehouse facilities in
South-Central Pennsylvania, and a short-line railroad and a rail intermodal
operation in New England, which provide customers with logistics services for
the movement and storage of freight.
b. Principles of Consolidation
---------------------------
The consolidated financial statements include the accounts of Emons
Transportation Group, Inc. and its wholly-owned subsidiaries. All significant
intercompany balances and transactions have been eliminated in consolidation.
c. Use of Estimates
----------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
d. Cash and Cash Equivalents
-------------------------
Cash and cash equivalents include cash on hand and highly liquid
short-term investments including bank repurchase agreements and money market
funds. Short-term instruments are carried at cost which approximates market
value.
e. Materials and Supplies
----------------------
Materials and supplies are stated at the lower of cost or market.
f. Properties
----------
Property, plant and equipment are carried at cost less accumulated
depreciation. The Company uses the Depreciation Accounting method for its three
railroad operations, the Maryland and Pennsylvania Railroad ("MPA"), Yorkrail
("YKR") and the St. Lawrence & Atlantic Railroad ("SLR"). Under Depreciation
Accounting, the initial cost or purchase price of railroad track structures is
depreciated over the estimated useful life of the track structures, and the cost
of replacing railroad track structures is capitalized and depreciated over the
estimated useful life of the replacements. Government grants received for track
rehabilitation programs relating to the replacement of railroad track structures
are accounted for as a reduction of the related capitalized cost of the track
structures.
Depreciation expense is computed on a straight-line basis over the
estimated useful lives of the respective assets which range from 25 to 35 years
for railroad track structures and from 3 to 20 years for all other assets.
24
<PAGE>
Property, plant and equipment at June 30, 1996 and 1995 consists of the
following:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Land and railroad track structures $20,418,033 $17,880,811
Equipment 4,116,825 4,097,433
Buildings 2,147,450 2,195,929
Other 60,560 60,560
----------- -----------
26,742,868 24,234,733
Less accumulated depreciation 8,490,416 7,549,786
----------- -----------
$18,252,452 $16,684,947
=========== ===========
</TABLE>
g. Deferred Expenses
-----------------
Financing costs are deferred and amortized over the terms of the
related agreements using the straight-line method of amortization. Costs
associated with the start-up of new operations are deferred and amortized over a
period of five years using the straight-line method of amortization.
Note 2. Change in Accounting Principle for Income Taxes
Effective July 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109 ("FAS 109"), "Accounting for Income Taxes". The new
standard of accounting replaces Statement of Financial Accounting Standards No.
96. Under FAS 109, deferred tax assets and liabilities are computed based on the
difference between the financial statement and income tax bases of assets and
liabilities using applicable enacted tax rates. Deferred income tax expense or
benefit is determined based on the changes in the deferred tax asset or
liability from period to period. The adoption of FAS 109 resulted in a
cumulative charge to expense of $750,000 in fiscal 1994, or $.13 per share.
25
<PAGE>
Note 3. Long-Term Debt
Long-term debt at June 30, 1996 and 1995 consists of the following:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
SLR Revolver Commitment, interest at prime $ 3,700,000 $ 3,800,000
SLR Term Note, interest at 11% 4,261,811 4,712,426
SLR Promissory Note, interest at prime 1,500,000 1,500,000
SLR Deferred Interest Note, interest at prime 137,599 181,052
SLR 1994 Track Rehabilitation Assistance Loan
from the State of Maine, non-interest bearing 646,832 334,457
SLR 1995 Track Rehabilitation Assistance Loan from the
State of New Hampshire, interest at 4.95% 190,944 --
YKR Term Loan, interest at prime plus 3% -- 115,294
YKR Senior Secured Term Loan, interest at 8.94% 193,335 --
YKR Seller Land Financing, interest at 10% 170,000 --
Equipment Loans, interest ranging from 9.5% to 12% 285,488 218,869
----------- -----------
11,086,009 10,862,098
Less current portion 967,837 818,813
----------- -----------
$10,118,172 $10,043,285
=========== ===========
</TABLE>
The prime rate as of June 30, 1996 was 8.25%.
The SLR Revolver Commitment and Term Note, and the YKR Senior Secured
Term Loan are secured by substantially all the assets of SLR and YKR,
respectively. As of June 30, 1996, the net book value of SLR's and YKR's assets
were $15,584,000 and $2,514,000, respectively.
The SLR and YKR loan agreements include certain restrictive covenants,
the more significant of which require that SLR and YKR , as applicable, meet
prescribed financial ratios and maintain specified levels of insurance, and
which also restrict additional borrowings, capital expenditures, dividends and
payments to Emons Transportation Group. As of June 30, 1996, all of the
financial covenants under these various agreements were met or were otherwise
waived by the respective lenders.
The SLR Revolver Commitment balance is reduced by $50,000 each quarter
through June 30, 1998, at which time the remaining balance of up to $3,350,000
is payable in full. The Revolver Commitment is also reduced by 80% of "Excess
Cash Flow", as defined in the Loan Agreement, at the end of each fiscal year. To
date, the Revolver Commitment balance has not been reduced by Excess Cash Flow.
The SLR Term Note is payable in monthly installments of $79,598,
including interest, through June 1998 at which time the outstanding balance is
due in full.
The SLR $1,500,000 Promissory Note is subordinated to the SLR Revolver
Commitment and Term Note. Commencing on the first quarterly payment date after
the SLR Revolver Commitment and Term Note are paid in full, the Promissory Note
is due in quarterly principal installments of $250,000 through September 1,
1998, at which time all outstanding amounts under the Note are due. The SLR
Deferred Interest Note is payable in monthly installments of $3,621, plus
interest at prime, until paid in full.
In fiscal 1994, the State of Maine awarded SLR a $646,832 non-interest
bearing term loan in connection with the State's track rehabilitation assistance
program. The term loan is
26
<PAGE>
payable in thirty semi-annual installments of $21,561 commencing December 31,
1996. In fiscal 1995, the State of New Hampshire awarded SLR a $1,150,000, 4.95%
track rehabilitation assistance term loan, $190,944 of which had been drawn as
of June 30, 1996 for track work completed under this program. This term loan,
plus accrued interest through completion of the project, is payable in quarterly
installments of approximately $23,000 over a twenty year period commencing not
later than six months following the scheduled completion date of December 31,
1996.
The YKR Term Loan was paid in full in June 1996. In December 1994, the
Company executed a $750,000 Senior Secured Term Loan with a local bank through
YKR. Under the original terms of the Loan Agreement, the Company could borrow up
to $750,000 through March 1, 1996, at which time the principal amount borrowed
is payable in increasing quarterly installments over five years from June 1,
1996 through March 1, 2001. In August 1995, the Company borrowed $200,000 under
this loan for project financing. In April 1996, the bank extended the remaining
balance available under this facility of $550,000 through June 30, 1997, at
which time the principal amount borrowed during the extension period is payable
in increasing quarterly installments over five years from September 30, 1997
through June 30, 2002. The loan bears interest at a rate of prime plus two
percent or may be fixed at the borrower's option, is secured by the Company's
locomotives located in York, Pennsylvania and the assets of YKR, and is
guaranteed by the parent Company and another subsidiary. In August 1996, the
Company borrowed an additional $225,000 under this loan to finance the
acquisition of locomotives.
The YKR seller land financing is payable in three equal annual
installments through August 1998. The Equipment Loans are payable in various
amounts ranging up to $4,358 per month, including interest, and mature at
various dates through November 2000.
Maturities of debt over the next five years are as follows:
Amount
------
Fiscal Year Due
----------- ---
1997 $ 967,837
1998 7,559,436
1999 1,789,091
2000 177,516
2001 129,633
For the fiscal years ended June 30, 1996, 1995 and 1994, the Company
made interest payments of $1,044,323, $1,063,779 and $1,099,323, respectively.
27
<PAGE>
Note 4. Lease Commitments
The Company leases land, rail facilities, its rail intermodal terminal,
locomotives and other equipment, automobiles and office space under
non-cancelable operating lease arrangements. As of June 30, 1996, future minimum
lease commitments under non-cancelable operating leases are as follows:
Fiscal Year
-----------
1997 $ 551,388
1998 582,895
1999 512,693
2000 376,945
2001 342,563
2002 and thereafter 2,719,807
----------
$5,086,291
==========
The Company leases its rail intermodal terminal from the City of
Auburn, Maine under a lease agreement which includes an initial term of 20
years, three optional 10 year renewal periods, and a purchase option in year 50.
Rent expense totaled $1,116,477, $722,253 and $480,917 for the fiscal
years ended June 30, 1996, 1995 and 1994, respectively.
Note 5. Preferred Stock
As of June 30, 1996, a total of 1,680,230 shares of $.14 Series A
Cumulative Convertible Preferred Stock were issued and outstanding. The
principal terms of the Preferred Stock are as follows:
a. Liquidation value is $2.00 per share.
b. Dividends, when and as declared by the Board of Directors, are
cumulative and payable semi-annually on January 1 and July 1 each year at a rate
of $.14 per share per annum.
c. Commencing on the second anniversary of the date of issuance,
September 27, 1989, and continuing thereafter, the $.14 Series A Cumulative
Convertible Preferred Stock may be redeemed, in whole or in part, at the option
of the Company at the following redemption prices:
September 27, 1995 $2.10
September 27, 1996 2.05
after September 27, 1997 2.00
d. Holders of the $.14 Series A Cumulative Convertible Preferred Stock
have the right to vote (on a one vote per share basis) as a class together with
the holders of Common Stock on all matters.
e. Each share of $.14 Series A Cumulative Convertible Preferred Stock
is convertible, at any time, into nine-tenths shares of Common Stock.
28
<PAGE>
Note 6. Income Taxes
The provision for income taxes for the years ended June 30, 1996, 1995
and 1994 is comprised of the following:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
Current:
<S> <C> <C> <C>
Federal $ 7,000 $ 25,000 $ --
State 88,500 80,300 180,000
-------- --------- --------
Total current 95,500 105,300 180,000
Deferred:
Federal 122,000 205,000 --
State 72,000 (2,000) 11,000
-------- --------- --------
Total deferred 194,000 203,000 11,000
Total $289,500 $ 308,300 $191,000
======== ========= ========
</TABLE>
The Company utilized approximately $600,000 of federal and $200,000 of
state net operating loss carryforwards in computing the fiscal 1996 provision
for income taxes.
Deferred tax assets and liabilities are comprised of the following at
June 30, 1996 and 1995:
<TABLE>
<CAPTION>
1996 1995
---- ----
Deferred tax assets:
<S> <C> <C>
Accrued expenses $ 566,000 $ 558,000
Net operating loss carryforwards 22,130,000 22,382,000
Investment tax credit carryforwards -- 367,000
------------ ------------
22,696,000 23,307,000
Valuation allowance (21,778,000) (22,482,000)
------------ ------------
918,000 825,000
------------ ------------
Deferred tax liabilities:
Property, plant and equipment 2,352,000 2,065,000
------------ ------------
Net deferred tax liability $ 1,434,000 $ 1,240,000
============ ============
</TABLE>
The valuation allowance relates principally to the net operating loss
and tax credit carryforwards and has been provided due to the magnitude of these
items, their fixed useful lives, and the realizability requirements established
by FAS 109.
Due to the Company's tax position for the fiscal years ended June 30,
1996, 1995 and 1994, an effective tax rate reconciliation would not be
meaningful.
At June 30, 1996, the Company had approximately $63,000,000 of net
operating loss ("NOL") carryforwards available which expire in various years
from fiscal 1997 through fiscal 2008, a significant portion of which expire in
fiscal 2002.
During fiscal 1996, 1995 and 1994, the Company made income tax payments
of $99,965, $182,172 and $41,440, respectively.
Note 7. Earnings (Loss) Per Common Share
Earnings (loss) per common share is computed by dividing net earnings
(loss) by the weighted average number of common shares and common share
equivalents for the period. Earnings (loss) per common share for the year ended
June 30, 1994 does not include the
29
<PAGE>
conversion of stock options, and earnings (loss) per common share for the years
ended June 30, 1996, 1995 and 1994 does not include shares of convertible
preferred stock, because the effect of such inclusion would be anti-dilutive.
Fully diluted earnings per common share amounts are not presented
because the effect on earnings (loss) per share is not material or is
anti-dilutive.
Note 8. Customer Concentrations
The majority of the Company's revenues are generated from freight
transportation services provided to customers in the Northeast and Mid-Atlantic
regions of the United States, many of whom are involved in the pulp and paper
industry.
During fiscal 1996, the Company's two largest customers accounted for
12% and 10% of the Company's operating revenues. These two customers each
accounted for 10% of fiscal 1995 revenues, and 10% and 11% of fiscal 1994
revenues, respectively.
Note 9. Dividends
On November 15, 1995, and June 19, 1996, the Board of Directors voted
to omit the regular semi-annual dividend of $.07 per share on its $.14
Cumulative Convertible Preferred Stock which would have been payable on January
2, 1996 and July 1, 1996, respectively. Dividends in arrears as of June 30, 1996
aggregated $1,411,393 as compared to $1,208,865 for the prior year.
Note 10. Contingent Liabilities
Emons Transportation Group is not a party to any legal proceedings.
However, Emons Industries, Inc. ("Industries"), a subsidiary of Emons
Transportation Group, is currently a defendant in 539 product liability actions.
The Company is in the process of cleaning up a fuel oil leak at its locomotive
maintenance facility in York, Pennsylvania.
Product Liability Actions
-------------------------
Prior to March 1971, under previous management, Industries (then known
as Amfre-Grant, Inc.) was engaged in the business of distributing (but not
manufacturing) various generic and prescription drugs. Industries sold and
discontinued these business activities in March 1971 and commenced its railcar
leasing and railroad operations in October 1971. One of the drugs which had been
distributed was diethylstilbestrol ("DES") which was taken by women during
pregnancy to prevent miscarriage.
As of September 5, 1996, Industries was one of numerous defendants
(including many of the largest pharmaceutical manufacturers) in 539 lawsuits in
which the plaintiffs allege that DES caused adenosis, infertility, cancer or
birth defects in the offspring or grandchildren of women who ingested DES during
pregnancy. In these actions, liability is premised on the defendant's
participation in the market for DES, and liability is several and limited to the
defendant's share of the market. Of these lawsuits, 533 were commenced after the
confirmation of Industries' Reorganization Plan in December 1986 (the "Plan"),
while the remaining 6 lawsuits are claims which will be treated under the Plan.
In one action, Industries is allegedly identified as the sole defendant. These
actions are currently in various stages of litigation.
Industries has filed a motion in Bankruptcy Court seeking a judgment
declaring that the 533 post-confirmation lawsuits represent claims which should
be asserted against Industries' Chapter 11 estate and are not
post-reorganization liabilities. Counsel has advised the Company that the
Bankruptcy Court should grant Industries' application to classify all of these
cases as bankruptcy claims. In addition, on February 14, 1995, the Bankruptcy
Court advised
30
<PAGE>
Industries that it would sign an order which would stay execution of any
judgment rendered against Industries pending determination of Industries'
application. The order, which was submitted to the Court on March 23, 1995, has
not yet been signed.
Industries has product liability insurance and defense coverage for
nearly all the claims which fall within the policy period 1948 to 1970 up to
varying limits by individual and in the aggregate for each policy year. To date,
Industries has not exhausted coverage in any policy year. During the period July
1, 1995 through September 12, 1996, 157 lawsuits were settled or dismissed at no
material liability to Industries. These settlements included 7 cases in which a
jury in New York State court had rendered awards in January 1994 prior to the
establishment of causation by plaintiffs. Industries' potential liability in
these cases totaled approximately $260,000, of which approximately $62,000 would
be paid by Industries' insurer. These cases were settled as bankruptcy claims at
no liability to Industries.
Management intends to vigorously defend all of these actions. In the
event that the post-reorganization lawsuits described above are not treated
under the Plan, it is possible that Industries could ultimately have liability
in these actions in excess of its product liability insurance coverage described
above. However, based on Industries' experience in prior DES litigation and its
current knowledge of pending cases, the Company believes that it is unlikely
that Industries' ultimate liability, if any, in excess of insurance coverage and
existing reserves in the pending cases will be in an amount sufficient to have a
material adverse effect upon the Company's consolidated financial position or
results of operations.
Environmental Liability
-----------------------
During fiscal 1994, the Company discovered a diesel fuel oil leak at
its locomotive maintenance facility in York, Pennsylvania resulting from the
fueling of its locomotives. The Company is currently working with the
Pennsylvania Department of Environmental Protection to clean up the contaminated
area. Based upon information currently available, the Company believes it has
provided adequate reserves as of June 30, 1996 for the estimated clean up costs.
Note 11. Stock Options and Warrants
During fiscal 1987, the Board of Directors and shareholders adopted the
1986 Stock Option Plan (the "Plan") The Plan provides for the issuance of a
maximum of 681,818 shares of the Company's Common Stock to key employees. Under
the Plan, the Company may grant either non-qualified or incentive stock options
at an exercise price not less than 100% of the fair market value at the date of
grant. Options may be exercised in accordance with time periods established by
the Compensation Committee of the Board of Directors, which currently range from
four to five years, and expire 10 years after the date of grant.
A summary of stock options issued under the Plan and related activity
is as follows:
<TABLE>
<CAPTION>
Number of Shares
----------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Outstanding beginning of year 640,000 530,000 507,500
Issued at $1.00 to $1.375 per share 20,000 495,000 22,500
Expired or canceled at $.84 to $2.56 per share (7,500) (385,000) --
-------- -------- -------
Outstanding end of year at $.8125 to
$2.56 per share 652,500 640,000 530,000
======== ======== =======
Exercisable 198,750 58,000 414,000
======== ======== =======
Available for grant 4,318 16,818 126,818
======== ======== =======
</TABLE>
31
<PAGE>
Separate from the above plan, the Company has granted stock options to
its non-employee directors on various dates from fiscal 1988 through fiscal 1996
to purchase shares of the Company's Common Stock at exercise prices equal to the
fair market value of the stock on the date of grant. The vesting period for
these options ranges from three to four years. A summary of stock options issued
to non-employee directors and related activity is as follows:
<TABLE>
<CAPTION>
Number of Shares
----------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Outstanding beginning of year 75,000 75,000 75,000
Issued at $1.0625 to $2.4375 per share 40,000 30,000 --
Expired or canceled at $.906 to $1.38 per share (25,000) (30,000) --
------- ------- ------
Outstanding end of year at $.906 to
$2.4375 per share 90,000 75,000 75,000
======= ======= ======
Exercisable 25,000 30,000 52,500
======= ======= ======
</TABLE>
At June 30, 1996, the Company had warrants outstanding to purchase up
to 200,000 shares of common stock at prices ranging from $1.00 to $1.125 per
share.
Note 12. Restricted Stock Plan
The Company has a Restricted Stock Plan under which the Company can
award up to 800,000 shares of Common Stock to employees. Shares awarded under
the Restricted Stock Plan may not be sold or transferred until they vest. The
Management Compensation Committee of the Board of Directors determines the
vesting schedule for each of the recipients of the Restricted Stock Awards.
During fiscal 1995, the Company awarded 17,000 shares of Common Stock which had
a fair value of $18,063 at the date of grant, and in fiscal 1994 awarded 71,500
shares of Common Stock which had a fair value of $71,500 at the date of grant.
Compensation under the Restricted Stock Plan is charged to earnings over the
respective vesting periods ranging from five to ten years, and amounted to
$32,802, $30,913 and $20,924 for fiscal 1996, 1995 and 1994, respectively. The
Company canceled 8,000 shares of Common Stock valued at $8,000 in fiscal 1996,
37,500 shares of Common Stock valued at $23,438 in fiscal 1995, and 600 shares
of Common Stock valued at $450 in fiscal 1994 which had been previously issued
under the Restricted Stock Plan. At June 30, 1996 and 1995, 336,450 and 328,450
shares were available for issuance, respectively.
32
<PAGE>
Schedule III
EMONS TRANSPORTATION GROUP, INC.
(Parent Company Only)
Balance Sheets
as of June 30, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
----------- -----------
ASSETS
Current Assets:
<S> <C> <C>
Cash and cash equivalents $ 491,259 $ 418,652
Accounts receivable 5,431 4,253
Prepaid expenses and other current assets 76,285 71,230
Due from affiliates 2,036,348 1,711,502
Deferred income taxes 22,000 50,000
------------ ------------
Total current assets 2,631,323 2,255,637
Investments in subsidiaries at equity 3,648,330 3,168,829
Property and equipment, net of accumulated
depreciation of $448,004 and $553,752
as of June 30, 1996 and 1995, respectively 92,689 46,075
Due from affiliates 1,705,330 1,618,884
Other assets 32,990 27,911
------------ ------------
TOTAL ASSETS $ 8,110,662 $ 7,117,336
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $ 11,807 $ --
Accounts payable 107,246 79,172
Accrued payroll and related expenses 90,587 89,969
Income taxes payable 8,244 20,632
Other accrued expenses 163,593 194,036
Due to affiliates 505,970 162,211
------------ ------------
Total current liabilities 887,447 546,020
Long-term debt 55,596 --
Note payable to affiliate 450,000 450,000
Deferred income taxes 1,099,000 1,005,000
------------ ------------
Total liabilities 2,492,043 2,001,020
------------ ------------
Stockholders' Equity:
Preferred stock, authorized 3,000,000 shares,
$0.14 Series A Cumulative Convertible Preferred Stock,
$0.01 par value, issued and outstanding 1,680,230 and
1,726,950 shares at June 30, 1996 and 1995, respectively 16,802 17,270
Common stock, $0.01 par value, authorized 11,000,000
shares, issued and outstanding 5,703,689 and 5,669,643
shares at June 30, 1996 and 1995, respectively 57,037 56,696
Additional paid-in capital 23,281,993 23,289,866
Deficit (17,562,914) (18,032,415)
------------ ------------
5,792,918 5,331,417
Unearned compensation - restricted stock awards (174,299) (215,101)
------------ ------------
Total Stockholders' Equity 5,618,619 5,116,316
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 8,110,662 $ 7,117,336
============ ============
</TABLE>
33
<PAGE>
Schedule III
EMONS TRANSPORTATION GROUP, INC.
(Parent Company Only)
Statements of Operations
for the years ended June 30, 1996, 1995 and 1994
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
Operating revenues:
<S> <C> <C> <C>
Intercompany management fees $ 1,471,555 $ 1,375,939 $ 1,298,108
----------- ----------- -----------
Operating expenses:
General and administrative expenses 1,451,705 1,342,731 1,225,593
Depreciation 21,733 14,151 49,082
----------- ----------- -----------
Total operating expenses 1,473,438 1,356,882 1,274,675
----------- ----------- -----------
Income (loss) from operations (1,883) 19,057 23,433
Other income (expense):
Interest and other income 35,670 23,456 19,209
Interest expense (33,787) (42,513) (42,642)
----------- ----------- -----------
Total other income (expense) 1,883 (19,057) (23,433)
----------- ----------- -----------
Income (loss) before income taxes, equity in
undistributed net earnings (loss) of
subsidiaries and cumulative effect of change in
accounting principle -- -- --
Provision for income taxes 10,000 (156,500) 225,000
----------- ----------- -----------
Income (loss) before equity in undistributed net
earnings (loss) of subsidiaries and cumulative
effect of change in accounting principle (10,000) 156,500 (225,000)
Equity in undistributed net earnings (loss) of
subsidiaries 479,501 609,577 (547,325)
----------- ----------- -----------
Income (loss) before cumulative effect of
change in accounting principle 469,501 766,077 (772,325)
Cumulative effect of change in accounting principle for
income taxes -- -- (162,000)
----------- ----------- -----------
Net income (loss) $ 469,501 $ 766,077 $ (934,325)
=========== =========== ===========
</TABLE>
34
<PAGE>
Schedule III
EMONS TRANSPORTATION GROUP, INC.
(Parent Company Only)
Statements of Cash Flows
for the years ended June 30, 1996, 1995 and 1994
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
Cash flow from operating activities:
<S> <C> <C> <C>
Net income (loss) $ 469,501 $ 766,077 $(934,325)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Cumulative effect of change in accounting
principle for income taxes -- -- 162,000
Depreciation 21,733 14,151 49,082
Amortization of deferred compensation 32,802 30,913 20,924
Equity in net (income) loss of subsidiaries (479,501) (609,577) 547,325
Provision for deferred income taxes 1,000 (184,000) --
Changes in assets and liabilities:
(Increase) decrease in accounts receivable,
prepaid expenses and other current assets (6,233) 9,748 1,183
Increase (decrease) in accounts payable and
accrued expenses (14,139) (10,781) 183,382
(Increase) decrease in other assets (5,079) 86,066 (79,483)
--------- --------- ---------
Net cash provided by (used in) operating activities 20,084 102,597 (49,912)
--------- --------- ---------
Cash flow from investing activities:
Additions to property and equipment (68,347) (23,354) (23,789)
Investments in subsidiaries -- (118,671) --
(Increase) decrease in due to/from affiliates, net 53,467 (63,051) 7,412
Dividends received from subsidiaries -- -- (11,521)
--------- --------- ---------
Net cash used in investing activities (14,880) (205,076) (27,898)
--------- --------- ---------
Cash flow from financing activities:
Proceeds from issuance of long-term debt 75,300 -- --
Reduction in long-term debt (7,897) -- --
--------- --------- ---------
Net cash provided by financing activities 67,403 -- --
--------- --------- ---------
Net increase (decrease) in cash and cash equivalents 72,607 (102,479) (77,810)
Cash and cash equivalents at beginning of year 418,652 521,131 598,941
--------- --------- ---------
Cash and cash equivalents at end of year $ 491,259 $ 418,652 $ 521,131
========= ========= =========
</TABLE>
35
<PAGE>
EXHIBIT.DOC
Pursuant to the requirement of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereto duly authorized.
EMONS TRANSPORTATION GROUP, INC.
By /s/ Robert Grossman Date: September 18, 1996
- --------------------------------------- ------------------------------------
Robert Grossman, Chairman of the Board
of Directors and Chief Executive
Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
/s/ Robert Grossman Date: September 18, 1996
- --------------------------------------- ------------------------------------
Robert Grossman, Chairman of the Board
of Directors and Chief Executive
Officer
/s/ Scott F. Ziegler Date: September 18, 1996
- --------------------------------------- ------------------------------------
Scott F. Ziegler, Vice President -
Finance, Controller and Secretary
/s/ Robert J. Smallacombe Date: September 18, 1996
- --------------------------------------- ------------------------------------
Robert J. Smallacombe, Director
/s/ Alfred P. Smith Date: September 18, 1996
- --------------------------------------- ------------------------------------
Alfred P. Smith, Director
/s/ Kimberly A. Madigan Date: September 18, 1996
- --------------------------------------- ------------------------------------
Kimberly A. Madigan, Director
/s/ Dean H. Wise Date: September 18, 1996
- --------------------------------------- ------------------------------------
Dean H. Wise, Director
36
<PAGE>
Exhibits
The following exhibits are filed as a part of this report. For convenience
of reference, exhibits are listed according to numbers assigned in the Exhibit
Table of Item 601 of Regulation S-K under the Securities Exchange Act of 1934.
<TABLE>
<CAPTION>
Page in
Exhibit Sequentially
Number Exhibit Numbered Copy
<S> <C> <C>
3 (a) Certificate of Incorporation for Emons Holdings, Inc.
dated December 19, 1986 (incorporated by reference
from Emons Holdings, Inc. Report on Form 10-K for the
year ended June 30, 1987) --
3 (b) Certificate of Amendment of Certificate of
Incorporation of Emons Holdings, Inc. dated
September 26, 1989 (incorporated by reference from
Emons Holdings, Inc. Report on Form 10-Q for the
quarter ended September 30, 1989) --
3 (c) Amended and Restated By-Laws for Emons Holdings, Inc.
(incorporated by reference from Emons Holdings, Inc.
Report on Form 10-Q for the quarter ended September
30, 1989) --
3 (d) Certificate of Amendment of Certificate of
Incorporation of Emons Holdings, Inc. Dated November
18, 1993 (incorporated by reference from Emons
Transportation Group, Inc. report on Form 10-Q for the
quarter ended December 31, 1993) --
10 (a) Lease Agreement dated July 19, 1994 by and between
the City of Auburn, Maine and Maine Intermodal
Transportation, Inc. (incorporated by reference from
Emons Transportation Group, Inc. report on Form 10-K
for the year ended June 30, 1995) --
10 (b) Financing and Security Agreement dated December 20,
1994 by and between Yorkrail, Inc. and The York
Bank and Trust Company (incorporated by reference from
Emons Transportation Group, Inc. report on Form 10-K
for the year ended June 30, 1995) --
10 (c) Second Amendment to Financing and Security Agreement
dated August 28, 1996 by and between Yorkrail, Inc.
and The York Bank and Trust Company 38
11 (a) Earnings per share calculation 44
21 (a) Listing of subsidiaries 45
23 (a) Consent of Arthur Andersen LLP 46
</TABLE>
37
<PAGE>
Exhibit 10(c)
SECOND AMENDMENT TO FINANCING AND SECURITY AGREEMENT
----------------------------------------------------
THIS SECOND AMENDMENT TO FINANCING AND SECURITY AGREEMENT (this
"Agreement") is made as of this ______ day of ___________, 1996, by and between
YORKRAIL, INC., a Delaware corporation (the "Borrower"), and THE YORK BANK AND
TRUST COMPANY, a Pennsylvania state banking corporation (the "Lender"),
witnesseth:
Recitals
A. The Lender made a loan to the Borrower in the principal amount not
to exceed $750,000 ("Financial Accommodations") pursuant to the terms and
conditions of a Financing and Security Agreement dated December 20, 1994
(together with any amendments or modifications thereto, the "Financing
Agreement"), by and between the Borrower and the Lender and as evidenced by a
Promissory Note dated December 20, 1994, from the Borrower payable to the Lender
in the principal amount of the Financial Accommodations (together with any
amendments or modifications thereto, the "Note").
B. Section 2.2(c) of the Financing Agreement provides that, among
other things, "[a]ll advances of the proceeds of the Loan must be made on or
before March 1, 1996."
C. The Borrower has requested that the Lender extend the date through
which advances may be made under the Financial Accommodations.
D. The Borrower has also requested that the Lender allow the Borrower
to finance certain additional locomotives under the Financial Accommodations in
accordance with the terms and provisions of the Financing Agreement.
E. The Lender has agreed to the Borrower's requests above subject to
the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of
-38-
<PAGE>
which are hereby acknowledged, the Borrower and the Lender hereby agree as
follows:
1. The facts set forth above are true and accurate in each respect.
All defined terms used herein shall have the meanings given such terms in the
Financing Agreement, unless otherwise defined herein.
2. The second sentence of Section 2.2(c) of the Financing Agreement
is hereby deleted and replaced with the following:
"All advances of the proceeds of the Loan must be made on or
before June 30, 1997."
3. The term "Locomotives" as used in the Financing Agreement shall
include the locomotives described on Exhibit 1 attached hereto and made a part
---------
hereof (the "Additional Locomotives"), together with (a) all additions, parts,
fittings, accessories, special tools, attachments and accessions now and
hereafter affixed thereto and/or used in connection therewith, (b) all
replacements thereof and substitutions therefor, and (c) all cash and non-cash
proceeds and products thereof.
4. Subject to the terms and conditions of the Financing and Security
Agreement, the Borrower may use proceeds of the Loan to acquire the Additional
Locomotives; provided, however, that the total amount advanced under the Loan
for all Locomotives shall continue to not exceed $500,000.
5. The term "this Agreement" as used in the Financing Agreement shall
mean the Financing Agreement as modified herein unless the context clearly
indicates or dictates a contrary meaning.
6. The Financing Agreement is hereby amended to add the following
provision to Article 3 thereof:
As security for the payment of all of the Obligations, the
Borrower hereby assigns, grants and conveys to the Lender and
agrees
-39-
<PAGE>
that the Lender shall have a perfected security interest in
the locomotives described on Exhibit 1 attached hereto and made a
---------
part hereof, together with (a) all additions, parts, fittings,
accessories, special tools, attachments and accessions now and
hereafter affixed thereto and/or used in connection therewith, (b)
all replacements thereof and substitutions therefor, and (c) all
cash and non-cash proceeds and products thereof.
The term "Collateral" as used in the Financing Agreement shall include all of
the property described in the foregoing paragraph.
7. The Borrower reaffirms all of the covenants and agreements set
forth in the Financing Agreement as if the same were set forth herein, except to
extent modified hereby.
8. The Borrower will execute such other confirmatory instruments with
respect to the Financing Agreement as the Lender may reasonably require.
9. In consideration of the Lender's agreement to modify the Financing
Agreement, the Borrower shall pay to the Lender upon the execution and delivery
of this Agreement a non-refundable extension fee in the amount of $5,500. In
addition, the Borrower covenants and agrees to pay all other out-of-pocket fees,
costs, charges and expenses incurred by the Lender in connection with the
preparation of this Agreement and the modification of the Financial
Accommodations, including without limitation, the Lender's reasonable attorneys
fees and all recording costs.
10. The Borrower ratifies and confirms all of its existing liabilities
and obligations under the Financing Agreement and agrees that, except as
expressly modified in this Agreement, the Financing Agreement continues in full
force and effect as if set forth specifically herein. The Borrower and the
Lender agree that this Agreement shall not be construed as an agreement to
-40-
<PAGE>
extinguish the original obligations under the Financing Agreement or the Note
and shall not constitute a novation as to the obligations of the Borrower under
the Financing Agreement or the Note.
11. This Agreement may not be amended, changed, modified, altered, or
terminated without in each instance the prior written consent of the Lender.
This Agreement shall be construed in accordance with and governed by the laws of
the Commonwealth of Pennsylvania.
12. This Agreement may be executed in any number of counterparts, all
of which when taken together shall constitute one agreement.
IN WITNESS WHEREOF, the Borrower and the Lender have caused this
Agreement to be executed under seal as of the date first above written.
WITNESS: YORKRAIL, INC.
By: (SEAL)
- ------------------------------- --------------------------
Scott F. Ziegler
Vice President & Controller
WITNESS: THE YORK BANK AND TRUST COMPANY
By: (SEAL)
- ------------------------------- --------------------------
Steven E. Stewart
Vice President
-41-
<PAGE>
JOINDER OF GUARANTORS
---------------------
The undersigned, guarantors pursuant to a Guaranty of Payment
Agreement (the "Guaranty") dated December 20, 1994, of the indebtedness
evidenced by the Note hereinabove referred to, hereby covenant and agree with
the Lender that the execution of the foregoing Second Modification to Financing
and Security Agreement by the Borrower does not and shall not in any manner
affect their obligations and liabilities under the Guaranty and that the
Guaranty remains in full force and effect.
Dated this _____ day of ______________, 1996.
WITNESS: EMONS TRANSPORTATION GROUP, INC.
______________________________ By:___________________________(SEAL)
Scott F. Ziegler
Vice President & Controller
MARYLAND AND PENNSYLVANIA RAILROAD
COMPANY
______________________________ By:___________________________(SEAL)
Scott F. Ziegler
Vice President & Controller
-42-
<PAGE>
EXHIBIT 1
---------
LOCOMOTIVES ADDED TO ORIGINAL FINANCING STATEMENT
-------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
EMD GP-16 Road Switcher EMD GP-16 Road Switcher
Engine #1733 Serial No. 5499-13 Engine #1735 Serial No. 5499-21
1800 H.P. 1800 H.P.
Built - 1956; Rebuilt 1981 Built 1956; Rebuilt 1981
Brake Equipment - 26C Brake Equipment - 26C
Multiple Unit Capability Multiple Unit Capability
EMD GP-16 Road Switcher EMD GP-16 Road Switcher
Engine #1734 Serial No. 5499-4 Engine #1815 Serial No. 5125-14
1800 H.P. 1800 H.P.
Built 1956; Rebuilt 1981 Built 1951; Rebuilt 1981
Brake Equipment - 26C Brake Equipment - 26C
Multiple Unit Capability Multiple Unit Capability
</TABLE>
-43-
<PAGE>
Exhibit 11 (a)
EMONS TRANSPORTATION GROUP, INC.
EARNINGS PER SHARE CALCULATION
<TABLE>
<CAPTION>
Fully
Primary Diluted
Year ended June 30, 1996 EPS EPS
- ------------------------ --------- --------
<S> <C> <C>
A. Average number of common shares outstanding 5,695,259 5,695,259
B. Average number of common share equivalents assuming
conversion of options (calculated using the treasury method) 376,962 438,143
---------- ----------
C. Subtotal 6,072,221 6,133,402
D. Average number of common share equivalents assuming
conversion of convertible preferred stock 1,528,440 1,528,440
---------- ----------
E. Total average common share and common share equivalents 7,600,661 7,661,842
F. Net income (loss) $ 469,501 $ 469,501
G. Preferred dividend requirements 237,757 237,757
H. Earnings applicable to common stock 231,744 231,744
I. Earnings per share - no conversion of preferred stock (H/(C)) $ 0.04 $ 0.04(1)
J. Earnings per share - assuming conversion of preferred stock (F/E) 0.06(1) 0.06(1)
Year ended June 30, 1995
- ------------------------
A. Average number of common shares outstanding 5,679,501 5,679,501
B. Average number of common share equivalents assuming
conversion of options (calculated using the treasury method) 125,872 142,293
---------- ----------
C. Subtotal 5,805,373 5,821,794
D. Average number of common share equivalents assuming
conversion of convertible preferred stock 1,554,295 1,554,295
---------- ----------
E. Total average common share and common share equivalents 7,359,668 7,376,089
F. Net income (loss) $ 766,077 $ 766,077
G. Preferred dividend requirements 241,773 241,773
H. Earnings applicable to common stock 524,304 524,304
I. Earnings per share - no conversion of preferred stock (H/(C)) $ 0.09 $ 0.09(1)
J. Earnings per share - assuming conversion of preferred stock (F/E) 0.10(1) 0.10(1)
Year ended June 30, 1994
- ------------------------
A. Average number of common shares outstanding 5,663,413 5,663,413
B. Average number of common share equivalents assuming
conversion of options (calculated using the treasury method) -- --
----------- -----------
C. Subtotal 5,663,413 5,663,413
D. Average number of common share equivalents assuming
conversion of convertible preferred stock 1,554,305 1,554,305
----------- -----------
E. Total average common share and common share equivalents 7,217,718 7,217,718
F. Net income (loss) $ (934,325) $ (934,325)
G. Preferred dividend requirements 241,781 241,781
H. Earnings applicable to common stock (1,176,106) (1,176,106)
I. Earnings per share - no conversion of preferred stock (H/(C)) $ (0.21) $ (0.21)(1)
J. Earnings per share - assuming conversion of preferred stock (F/E) (0.13)(1) (0.13)(1)
</TABLE>
(1) Not material or anti-dilutive.
44
<PAGE>
Exhibit 21(a)
EMONS TRANSPORTATION GROUP, INC.
Listing of Subsidiaries
June 30, 1996
<TABLE>
<CAPTION>
State of
Subsidiary Incorporation
---------------------------------------------------- ------------------
<S> <C>
Emons Industries, Inc. New York
Emons Logistics Services, Inc. Delaware
Emons Railroad Group, Inc. Delaware
St. Lawrence & Atlantic Railroad Company Delaware
Yorkrail, Inc. Delaware
Maine Intermodal Transportation, Inc. Delaware
Maryland and Pennsylvania Railroad Company Pennsylvania
</TABLE>
45
<PAGE>
Exhibit 23(a)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our
reports dated September 5, 1996 included in this annual report on Form 10-K into
the Company's previously filed: Form S-8 Registration Statement File No.
33-22485 and Form S-3 Registration Statement File No. 33-22485.
Lancaster, PA
September 26, 1996
46
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE EMONS
TRANSPORTATION GROUP, INC. CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED
JUNE 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> JUN-30-1996
<CASH> 1,265,373
<SECURITIES> 0
<RECEIVABLES> 2,404,730
<ALLOWANCES> 76,899
<INVENTORY> 204,656
<CURRENT-ASSETS> 4,293,282
<PP&E> 26,742,868
<DEPRECIATION> 8,490,416
<TOTAL-ASSETS> 22,789,914
<CURRENT-LIABILITIES> 4,939,262
<BONDS> 10,118,172
0
16,802
<COMMON> 57,037
<OTHER-SE> 5,544,780
<TOTAL-LIABILITY-AND-EQUITY> 22,789,914
<SALES> 0
<TOTAL-REVENUES> 14,917,077
<CGS> 0
<TOTAL-COSTS> 10,521,232
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,025,175
<INCOME-PRETAX> 759,001
<INCOME-TAX> 289,500
<INCOME-CONTINUING> 469,501
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 469,501
<EPS-PRIMARY> .04
<EPS-DILUTED> 0
</TABLE>
