<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended March 31, 1996 Commission File Number 0-5206
-------------- ------
EMONS TRANSPORTATION GROUP, INC.
(Exact name of registrant as specified in its charter)
Delaware 23-2441662
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(State of Incorporation) (I. R. S. Employer Identification No.)
96 South George Street, York, Pennsylvania 17401 (717-771-1700)
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(Address of principal executive offices) (Zip Code)(Telephone No.)
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
-----
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes X No
-----
The number of shares of each class of common stock of the registrant issued
and outstanding as at March 31, 1996 is as follows:
Voting Common Stock 5,711,689
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<PAGE>
EMONS TRANSPORTATION GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(unaudited)
<TABLE>
<CAPTION>
March 31, June 30,
1996 1995
---------------- ---------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 1,376,856 $ 1,232,859
Accounts receivable, net 1,672,509 1,770,681
Materials and supplies 135,968 359,385
Prepaid expenses 420,754 285,436
Deferred income taxes 50,000 50,000
---------------- ---------------
Total current assets 3,656,087 3,698,361
---------------- ---------------
Property, plant and equipment 26,218,405 24,234,733
Less accumulated depreciation (8,204,472) (7,549,786)
---------------- ---------------
18,013,933 16,684,947
Deferred expenses and other assets 263,661 362,267
---------------- ---------------
TOTAL ASSETS $ 21,933,681 $ 20,745,575
================ ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $ 958,973 $ 818,813
Accounts payable 1,027,498 708,234
Accrued payroll and related expenses 794,590 849,867
Income taxes payable 88,778 88,573
Other accrued expenses 1,332,274 1,228,765
--------------- ----------------
Total current liabilities 4,202,113 3,694,252
--------------- ----------------
Long-term debt (Note 3) 10,123,668 10,043,285
Other liabilities 599,624 601,722
Deferred income taxes 1,487,000 1,290,000
--------------- ----------------
Total Liabilities 16,412,405 15,629,259
--------------- ----------------
Stockholders' Equity:
Cumulative convertible preferred stock 16,802 17,270
Common stock 57,117 56,696
Additional paid-in capital 23,289,912 23,289,866
Deficit (17,651,627) (18,032,415)
--------------- ----------------
5,712,204 5,331,417
Unearned compensation - restricted
stock awards (190,928) (215,101)
--------------- ----------------
Total Stockholders' Equity 5,521,276 5,116,316
--------------- ----------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 21,933,681 $ 20,745,575
=============== ===============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
EMONS TRANSPORTATION GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
March 31, March 31,
-------------------------- ---------------------------
1996 1995 1996 1995
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Operating revenues $ 3,816,354 $ 3,401,275 $ 11,218,104 $ 10,327,753
Operating expenses:
Cost of operations 2,904,939 2,364,478 7,932,215 6,914,443
Selling and administrative 624,804 661,212 1,976,097 2,023,932
---------- ---------- ----------- -----------
3,529,743 3,025,690 9,908,312 8,938,375
---------- ---------- ----------- -----------
Income from operations 286,611 375,585 1,309,792 1,389,378
Other income (expense):
Interest income 17,609 15,552 53,228 45,602
Interest expense (229,899) (263,770) (773,642) (788,626)
Other, net 23,262 79,410 3,595
---------- ---------- ----------- -----------
(189,028) (248,218) (641,004) (739,429)
---------- ---------- ----------- -----------
Income before income taxes 97,583 127,367 668,788 649,949
Provision for income taxes 35,500 62,500 288,000 184,500
---------- ---------- ----------- -----------
Net income 62,083 64,867 380,788 465,449
Preferred dividend requirements 58,808 60,446 178,949 181,336
---------- ---------- ----------- -----------
Income applicable to common stock $ 3,275 $ 4,421 $ 201,839 $ 284,113
========== ========== =========== ===========
Average common shares and common
share equivalents (Note 2) 6,118,048 5,818,041 6,119,217 5,808,758
========== ========== =========== ===========
Earnings per common share and
common share equivalent (Note 2) $ 0.00 $ 0.00 $ 0.03 $ 0.05
========== ========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
EMONS TRANSPORTATION GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
March 31,
------------------------
1996 1995
----------- -----------
<S> <C> <C>
Cash flow from operating activities:
Net income $ 380,788 $ 465,449
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 850,357 768,940
Amortization of deferred expenses 71,061 65,479
Amortization of deferred compensation 24,172 24,577
Gain on disposal of assets (79,410) (3,595)
(Increase) decrease in accounts receivable,
materials and supplies, and prepaid expenses 186,271 (36,945)
Increase (decrease) in accounts payable,
accrued expenses, and other liabilities 365,603 (32,911)
Increase in deferred income taxes 197,000 120,000
----------- -----------
Net cash provided by operating activities 1,995,842 1,370,994
----------- -----------
Cash flow from investing activities:
Proceeds from disposal of assets 176,986 7,563
Additions to property, plant and equipment (2,276,919) (1,369,406)
(Increase) decrease in deferred expenses
and other assets 27,545 (28,072)
----------- -----------
Net cash used in investing activities (2,072,388) (1,389,915)
----------- -----------
Cash flow from financing activities:
Proceeds from issuance of long-term debt 780,223 172,382
Reduction in long-term debt (559,680) (685,556)
----------- -----------
Net cash provided by (used in) financing activities 220,543 (513,174)
----------- -----------
Net increase (decrease) in cash and cash equivalents 143,997 (532,095)
Cash and cash equivalents at beginning of period 1,232,859 1,565,163
----------- -----------
Cash and cash equivalents at end of period $ 1,376,856 $ 1,033,068
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
EMONS TRANSPORTATION GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Nine Months Ended March 31, 1996
(unaudited)
Note 1. The information furnished herein has been prepared in accordance with
generally accepted accounting principles. In the opinion of the
management of Emons Transportation Group, Inc. (the "Company" or "Emons
Transportation Group"), all adjustments (which include only normal
recurring adjustments) considered necessary to present a fair statement
of the results for the periods covered by this report have been made.
Note 2. Earnings per common share are computed by dividing net earnings by the
weighted average number of common shares and common share equivalents
for the period. Earnings per common share for the three and nine month
periods ended March 31, 1996 and 1995 do not include conversion of
convertible preferred stock because the effect of such inclusion would
be anti-dilutive.
Note 3. In December 1994, the Company executed a $750,000 Senior Secured Term
Loan with a local bank through one of its railroad subsidiaries. Under
the 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 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 to finance the acquisition of
land and construction of a new logistics lumber transload and storage
facility in York, Pennsylvania. The seller of the land also issued a
note in the amount of $170,000, which bears interest at a rate of 10%
per annum, and is repayable in three equal annual installments
commencing August 1996. In April 1996, the bank issued a commitment
letter to the Company to extend the remaining balance of $550,000
available under this facility through June 1997.
Note 4. Emons Transportation Group is not currently a party to any legal
proceedings. However, Emons Industries, Inc. ("Industries"), a
subsidiary of the Company, is currently a defendant in 458 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 April 30, 1996, Industries was one of numerous defendants
(including many of the largest pharmaceutical manufacturers) in 458
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, 452 were commenced after the confirmation of
Industries' Reorganization Plan in December 1986
<PAGE>
(the "Plan"), while the remaining 6 lawsuits are claims which will be
treated under the Plan. These actions are currently in various stages
of litigation.
Industries has filed a motion in Bankruptcy Court seeking a judgment
declaring that the 452 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 in March 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 insurance coverage in any
policy year. During the period January 1, 1996 through April 30, 1996,
89 lawsuits were settled or dismissed at no material 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 March 31,
1996 for the estimated clean up costs.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
------------------------------------
Liquidity and Capital Resources
The Company's primary sources of liquidity include its cash and accounts
receivable, which aggregated $3,049,000 and $3,004,000 at March 31, 1996 and
June 30, 1995, respectively, and the balance available under a $750,000 Senior
Secured Term Loan issued by a local bank to a subsidiary. Under the 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, PA to accommodate a new customer. In
April 1996, the bank issued a commitment letter to the Company to extend the
remaining balance of $550,000 available under this facility through June 1997.
The Company 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 $144,000 for the nine
month period ended March 31, 1996. The net increase includes $1,996,000 of cash
provided by operations, $177,000 of proceeds from the disposal of property and
equipment, and $220,000 additional net borrowings, partially offset by
$2,277,000 of capital investments.
The Company generated $1,996,000 of cash from operations for the nine month
period ended March 31, 1996 as compared to $1,371,000 for the corresponding
period in the prior year. Excluding working capital and other liabilities, cash
provided by operations increased slightly from $1,441,000 for the nine months
ended March 31, 1995 to $1,444,000 for the nine months ended March 31, 1996.
Cash provided by working capital items and other liabilities totaled
$552,000 for the nine months ended March 31, 1996, consisting principally of a
$319,000 increase in accounts payable, a $98,000 decrease in accounts
receivable, and a $223,000 decrease in materials and supplies. The increase in
accounts payable is primarily attributable to the $589,000 increase in operating
expenses during the third quarter of fiscal 1996 as compared to the prior year
due to the impact of unfavorable winter weather conditions, discussed further
below, and the growth in the Company's logistics and intermodal businesses. The
decrease in accounts receivable is the result of intensified collection efforts,
while the decrease in materials and supplies is attributable to the use of these
items in capital track projects.
The Company invested $2,277,000 in capital expenditures during the first
nine months of fiscal 1996. Expenditures include $1,667,000 in railroad track
structures (net of $788,000 of government grants) in connection with the
Company's continuing extensive track rehabilitation program, $370,000 for land
and improvements in connection with the construction of a logistics lumber
transload and storage facility in York, PA, and $70,000 for computer equipment
in connection with a computer systems upgrade project. As of March 31, 1996,
the Company has available in excess of $1.2 million of government grants for
track rehabilitation projects, and has been awarded an additional $125,000
government grant and in excess of $1.5 million of government funding under no or
low interest loan programs for future track rehabilitation projects.
Proceeds from the disposal of property and equipment include approximately
$62,000 for the sale of land to a customer in York, PA, $55,000 for the sale of
a vacant railroad station on the St. Lawrence & Atlantic Railroad ("SLR") which
was previously used as SLR's main office in Berlin, NH, and $48,000 of estimated
insurance proceeds for a SLR locomotive which was destroyed in a derailment
incident.
<PAGE>
The Company's long-term debt obligations increased $220,000 during the nine
month period ended March 31, 1996 including $560,000 of scheduled debt
repayments offset by $780,000 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, $262,000
of borrowings under a government funded no interest loan track rehabilitation
program, and $148,000 of borrowings under computer and equipment loan
arrangements.
Analysis of Operations for the three months ended March 31, 1996
compared to the three months ended March 31, 1995
Results of Operations
The Company generated net income of $62,000 for the three month period
ended March 31, 1996 as compared to net income of $65,000 for the three month
period ended March 31, 1995. Income before income taxes decreased $29,000 from
$127,000 for the three months ended March 31, 1995 to $98,000 for the
corresponding period in the current year. The decrease includes an increase in
operating revenues of $415,000, an increase in non-operating income of $23,000,
and a decrease in interest expense of $34,000, offset by an increase in
operating expenses of $504,000. Operating results for the three month period
ended March 31, 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. The provision for income taxes decreased $27,000 from
the prior year.
Revenues
Operating revenues increased $415,000, or 12%, from $3,401,000 for the
three months ended March 31, 1995 to $3,816,000 for the corresponding period in
the current year. This increase includes $262,000 additional freight and haulage
revenues (excluding intermodal freight), $89,000 additional logistics revenues,
$36,000 additional intermodal freight and handling revenues, and $28,000 net
additional other operating revenues.
Freight and haulage revenues increased $262,000, or 11%, consisting of a 9%
increase in the number of carloads handled and a 2% increase in average revenues
per carload. The total number of carloads handled increased approximately 700
carloads from 7,900 for the three months ended March 31, 1995 to 8,600 for the
three months ended March 31, 1996. The net increase includes 180 additional
agricultural carloads in York, PA, 150 additional carloads generated by the
Company's logistics operations in York, PA, and approximately 800 additional
carloads on SLR. The significant increase in business on SLR for the current
quarter is attributable to the unfavorable impact of a strike on the Canadian
National Railway ("CN"), SLR's major connecting rail carrier, in the prior year
quarter ended March 31, 1995, as well as the favorable impact of sales and
marketing efforts despite unfavorable market conditions in the paper industry.
These increases were partially offset by over 200 fewer carloads to a paper
manufacturer in York, PA as a result of pulp and paper market conditions, and a
variety of other less significant decreases. In addition, business on all three
of the Company's railroads was unfavorably impacted by severe winter weather
conditions in the Mid-Atlantic and Northeast regions during the current quarter,
including heavy snowfall, which caused many customers to close plants for
several days and caused delays in railcar deliveries. The 2% increase in
average revenues per carload is attributable to mix of business, which includes
a greater percentage of carloads handled by SLR during the current quarter which
are generally at higher rates.
<PAGE>
Total logistics revenues generated by the Company's operations in York, PA
increased $89,000, or 34%, for the quarter ended March 31, 1996 as compared to
the prior year quarter. This increase includes a 30% increase in the number of
railcars handled and the expansion of warehousing services.
The Company's rail intermodal terminal, which commenced operations on SLR
in September 1994, generated an additional $36,000 of freight and intermodal
handling revenues during the quarter ended March 31, 1996 as compared to the
corresponding quarter in the prior year. The terminal handled approximately
1,950 trailers and containers during the three month period ended March 31, 1996
as compared to 1,100 trailers and containers during the three months ended March
31, 1995.
The $23,000 of non-operating income in the current quarter includes gains
on the sales of non-essential real estate, including a vacant railroad station
on SLR.
Expenses
Operating expenses increased $504,000, or 17%, from $3,026,000 for the
three month period ended March 31, 1995 to $3,530,000 for the three month period
ended March 31, 1996. The increase consists of $540,000 additional cost of
operations partially offset by a $36,000 reduction in selling and administrative
expenses.
Cost of operations increased $540,000, or 23%, from $2,365,000 for the
three month period ended March 31, 1995 to $2,905,000 for the corresponding
period in the current year. The increase includes $441,000 additional railroad
operating expenses, $77,000 additional logistics operating expenses, and $22,000
additional intermodal operating expenses.
Additional maintenance of way and transportation expenses accounted for in
excess of $425,000 of the increase in railroad operating expenses. These
increases are partly attributable to the impact of unfavorable winter weather
conditions in the Mid-Atlantic and Northeast regions in the current year, as
compared to mild winter conditions in the prior year, on all three of the
Company's railroad operations. The unusually heavy snowfall and cold
temperatures required additional unanticipated 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 prior year quarter 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 intermodal operating expenses are
attributable to the corresponding increases in the level of business in each of
these operations.
Selling and administrative expenses decreased $36,000, or 5.5%, from
$661,000 for the quarter ended March 31, 1995 to $625,000 for the quarter ended
March 31, 1996. The net decrease includes additional salaries and wages as a
result of wage adjustments effective January 1, 1996 and staff additions to
accommodate increased business levels, and additional professional fees and
travel expenses incurred to pursue potential business opportunities. These
increases were more than offset by the favorable settlement of disputed local
business taxes to the City of York, Pennsylvania in the amount of $85,000
pertaining to fiscal years 1988 through 1995, which was recorded as a reduction
of expense in the current quarter.
Interest expense decreased $34,000 for the three month period ended March
31, 1996 as compared to the prior year primarily as a result of a $32,000
reduction of accrued interest expense recorded in the current quarter 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.
<PAGE>
The provision for income taxes decreased $27,000 from $63,000 for the
quarter ended March 31, 1995 to $36,000 for the quarter ended March 31, 1996.
The decrease is attributable to lower pre-tax income and adjusted deferred
federal income tax liabilities provided for the book and tax difference in the
timing of depreciation of the Company's railroad track structures.
Analysis of Operations for the nine months ended March 31, 1996
compared to the nine months ended March 31, 1995
Results of Operations
The Company generated net income of $381,000 for the nine month period
ended March 31, 1996 as compared to net income of $465,000 for the nine month
period ended March 31, 1995. Income before income taxes increased $19,000 from
$650,000 for the nine months ended March 31, 1995 to $669,000 for the
corresponding period in the current year. The net increase includes $890,000
additional operating revenues, $76,000 additional non-operating income, and a
$15,000 decrease in interest expense, partially offset by an increase in
operating expenses of $970,000. Operating results for the nine month period
ended March 31, 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 nine month prior year
period ended March 31, 1995 included two significant transactions. First, the
Company recorded a $223,000 favorable retroactive pricing adjustment for SLR
negotiated with CN for the period July 1, 1992 through September 30, 1994, of
which $158,000 was attributable to periods prior to fiscal 1995. Second, the
Company provided $141,000 for expenses associated with the relocation of SLR
personnel and SLR's administrative offices located in Berlin, NH to Auburn, ME.
The provision for income taxes increased $103,000 over the prior year.
Revenues
Operating revenues increased $890,000, or 8.6%, from $10,328,000 for the
nine months ended March 31, 1995 to $11,218,000 for the corresponding period in
the current year. This net increase includes $373,000 additional freight and
haulage revenues (excluding intermodal freight), $181,000 additional logistics
revenues, $297,000 additional intermodal freight and handling revenues, and
$39,000 net additional other operating revenues.
Freight and haulage revenues increased $373,000, or 5%, consisting of a
corresponding 5% increase in the number of carloads handled. Average revenues
per carload were consistent for both nine month periods. The total number of
carloads handled increased approximately 1,300 carloads from 24,500 for the nine
months ended March 31, 1995 to 25,800 for the nine months ended March 31, 1996.
The net increase includes 575 additional carloads generated by the Company's
logistics operations in York, PA, 400 additional carloads to a warehouse
customer in York, PA, 300 additional coal carloads (three unit coal trains) on
the railroad operations in York, PA, 275 additional agricultural carloads in
York, PA, and approximately 800 additional carloads on SLR. The significant
increase in business on SLR for the current year is attributable to a strike on
CN which occurred in March 1995, as well as the favorable impact of sales and
marketing efforts despite unfavorable market conditions in the paper industry,
particularly in the most recent quarter. These increases were partially offset
by over 600 fewer carloads to a paper manufacturer in York, PA as a result of
pulp and paper market conditions, 200 fewer salt carloads on SLR, and a variety
of other less significant decreases.
Total logistics revenues generated by the Company's operations in York, PA
increased $181,000, or 21%, for the nine month period ended March 31, 1996 as
compared to the corresponding period in the prior year. This increase includes a
35% increase in the number of railcars
<PAGE>
handled and the expansion of warehousing services. In addition, the Company's
logistics operations accounted for approximately $400,000 freight and haulage
revenues for the railroad operations in York, PA during the current year as
compared to $290,000 in the corresponding period in the prior year.
The Company's rail intermodal terminal, which commenced operations on SLR
in late September 1994, generated $297,000 additional freight and intermodal
handling revenues during the nine month period ended March 31, 1996 as compared
to the corresponding period in the prior year. The terminal handled
approximately 6,350 trailers and containers during the first nine months of
fiscal 1996 as compared to 1,900 trailers and containers during approximately
six months of operations in fiscal 1995.
The $39,000 net increase in other operating revenues over the prior year
includes a $178,000 increase in demurrage revenues and a $60,000 increase in car
hire revenues generated under railcar leasing arrangements. These increases
were partially offset by the $158,000 SLR pricing adjustment recorded in the
prior year.
Non-operating income increased $76,000 over the prior year due to net gains
on the sale of non-essential real estate including a parcel of land in York, PA
and a vacant railroad station on SLR.
Expenses
Operating expenses increased $970,000, or 11%, from $8,938,000 for the nine
month period ended March 31, 1995 to $9,908,000 for the nine month period ended
March 31, 1996. The net increase consists of $1,018,000 additional cost of
operations partially offset by a $48,000 reduction in selling and administrative
expenses.
Cost of operations increased $1,018,000, or 15%, from $6,914,000 for the
nine month period ended March 31, 1995 to $7,932,000 for the corresponding
period in the current year. The net increase includes $727,000 additional
railroad operating expenses, $136,000 additional logistics operating expenses,
and $155,000 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
nine month period in the current year as compared to approximately six months in
the prior year, and to operate three additional unit coal trains on the railroad
operations in York, PA in the current year. 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 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 prior year.
The unusually heavy snowfall and cold temperatures required additional
unanticipated 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. Car hire expense increased in excess of
$90,000 over the prior year primarily as a result of revised agreements with a
connecting carrier for the Pennsylvania railroad operations in the current year.
Additional demurrage revenues for these operations under the revised agreements
more than offset the increase in expense. The increases in maintenance of way
and transportation expenses were partially offset by a decrease in locomotive
maintenance expenses on SLR.
<PAGE>
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 nine months of intermodal operations in the
current year as compared to approximately six months of operations in the prior
year.
Selling and administrative expenses decreased $48,000, or 2.4%, from
$2,024,000 for the nine months ended March 31, 1995 to $1,976,000 for the nine
months ended March 31, 1996. The net decrease includes approximately $100,000
additional wages and benefits as a result of wage adjustments effective January
1, 1996 and staff additions to accommodate increased business levels, $67,000
additional intermodal sales and administrative expenses as a result of nine
months of operations in the current year versus six months of operations in the
prior year, and additional professional fees and travel expenses to pursue
potential business opportunities. These increases were more than offset by the
favorable settlement of disputed local business taxes to the City of York,
Pennsylvania in the amount of $85,000 pertaining to fiscal years 1988 through
1995, which was recorded as a reduction of expense in the current year, $141,000
of expenses provided for the relocation of SLR's administrative offices from
Berlin, NH to Auburn, ME in the prior year and a $28,000 investment in new
marketing brochures in the prior year.
Interest expense decreased $15,000 for the nine month period ended March
31, 1996 as compared to the prior year due to the net increase in long-term
borrowings incurred to finance capital projects for the Company's expanding
logistics operations in York, PA and the acquisition of equipment, offset by 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 increased $103,000 from $185,000 for the
nine months ended March 31, 1995 to $288,000 for the nine months ended March 31,
1996. The increase includes $77,000 additional deferred state and federal
income tax liabilities provided for the book and tax difference in the timing of
depreciation of the Company's railroad track structures, and is primarily
attributable to over $1.6 million of capitalized trackwork performed during the
current year.
<PAGE>
PART II.
Item 1. Legal Proceedings
As previously reported in Item 3 of the Emons Transportation Group, Inc.
Annual Report on Form 10-K for the fiscal year ended June 30, 1995, in which
reference is hereby made, Emons Transportation Group, Inc. is not currently a
party to any legal proceedings. However, Emons Industries, Inc. is currently a
defendant in approximately 458 product liability actions.
Item 3. Default Upon Senior Securities
On June 23, 1995 and November 15, 1995, the Board of Directors voted to
omit the regular semi-annual dividend of $0.07 per share on its $0.14 Cumulative
Convertible Preferred Stock which would have been payable on July 3, 1995 and
January 2, 1996, respectively. Dividends in arrears as of the date of this
report aggregated $1,293,777.
Item 4. Any Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders during the three
month period ended March 31, 1996.
Item 6. Exhibit and Reports on Form 8-K
(a) An index to exhibits appears following the signature page to this
report.
(b) No reports on Form 8-K were filed during the three month period
ended March 31, 1996.
<PAGE>
SIGNATURES
Pursuant to the Requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
EMONS TRANSPORTATION GROUP, INC.
Date: May 13, 1996 By: /s/Scott F. Ziegler
------------ -------------------
Scott F. Ziegler
Vice President and Controller
(signing on behalf of the registrant
as both its duly authorized officer
and its chief accounting officer)
<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.
Page in
Exhibit Sequentially
Number Exhibit Numbered Copy
3 (a) Certificate of Incorporation for Emons Transportation
Group, Inc. dated December 19, 1986 (incorporated
by reference from Emons Transportation Group, Inc.
Report on Form 10-K for the year ended June 30, 1987) ---
3 (b) Certificate of Amendment of Certificate of Incorporation
of Emons Transportation Group, Inc. dated September
26, 1989 (incorporated by reference from Emons
Transportation Group, Inc. Report on Form 10-Q for
the quarter ended September 30, 1989) ---
3 (c) Amended and Restated By-Laws for Emons Transportation
Group, Inc. (incorporated by reference from Emons
Transportation Group, Inc. Report on Form 10-Q for
the quarter ended September 30, 1989) ---
3 (d) Certificate of Amendment of Certificate of Incorporation
of Emons Transportation Group, 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) ---
11 (a) Earnings per share calculation 16
27 (a) Article 5 of Regulation S-X, Financial Data Schedules ---
<PAGE>
Exhibit 11 (a)
EMONS TRANSPORTATION GROUP, INC.
EARNINGS PER SHARE CALCULATION
<TABLE>
<CAPTION>
Three Months Nine Months
---------------------------- -------------------------------
Fully Fully
Primary Diluted Primary Diluted
EPS EPS EPS EPS
------- ------- ------- -------
<S> <C> <C> <C> <C>
Period Ended March 31, 1996
A. Average number of common shares outstanding 5,711,689 5,711,689 5,690,045 5,690,045
B. Average number of common share equivalents
assuming conversion of options (calculated
using the treasury method) 406,359 406,359 429,172 438,919
C. Average number of common share equivalents
assuming conversion of convertible preferred stock 1,512,207 1,512,207 1,533,851 1,533,851
D. Total average common share and common share
equivalents 7,630,255 7,630,255 7,653,068 7,662,815
E. Net income $ 62,083 $ 62,083 $ 380,788 $ 380,788
F. Preferred dividend requirements 58,808 58,808 178,949 178,949
G. Earnings applicable to common stock 3,275 3,275 201,839 201,839
H. Earnings per share - no conversion (G/(A+B)) $ 0.00 $ 0.00 (1) $ 0.03 $ 0.03 (1)
I. Earnings per share - assuming conversion (E/D) 0.01 (1) 0.01 (1) 0.05 (1) 0.05 (1)
Period Ended March 31, 1995
A. Average number of common shares outstanding 5,682,926 5,682,926 5,685,508 5,685,508
B. Average number of common share equivalents
assuming conversion of options (calculated
using the treasury method) 135,115 135,115 123,250 137,618
C. Average number of common share equivalents
assuming conversion of convertible preferred stock 1,554,305 1,554,305 1,554,305 1,554,305
D. Total average common share and common share
equivalents 7,372,346 7,372,346 7,363,063 7,377,431
E. Net income $ 64,867 $ 64,867 $ 465,449 $ 465,449
F. Preferred dividend requirements 60,446 60,446 181,336 181,336
G. Earnings applicable to common stock 4,421 4,421 284,113 284,113
H. Earnings per share - no conversion (G/(A+B)) $ 0.00 $ 0.00 (1) $ 0.05 $ 0.05 (1)
I. Earnings per share - assuming conversion (E/D) 0.01 (1) 0.01 (1) 0.06 (1) 0.06 (1)
</TABLE>
(1) Not material or anti-dilutive.
<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 NINE MONTHS
ENDED MARCH 31, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-1-1995
<PERIOD-END> MAR-31-1996
<CASH> 1,376,856
<SECURITIES> 0
<RECEIVABLES> 1,773,036
<ALLOWANCES> 100,527
<INVENTORY> 135,968
<CURRENT-ASSETS> 3,656,087
<PP&E> 26,218,405
<DEPRECIATION> 8,204,472
<TOTAL-ASSETS> 21,933,681
<CURRENT-LIABILITIES> 4,202,113
<BONDS> 10,123,668
0
16,802
<COMMON> 57,117
<OTHER-SE> 5,447,357
<TOTAL-LIABILITY-AND-EQUITY> 21,933,681
<SALES> 0
<TOTAL-REVENUES> 11,218,104
<CGS> 0
<TOTAL-COSTS> 7,932,215
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 773,642
<INCOME-PRETAX> 668,788
<INCOME-TAX> 288,000
<INCOME-CONTINUING> 380,788
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 380,788
<EPS-PRIMARY> .03
<EPS-DILUTED> 0
</TABLE>
