<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
Quarter Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
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For Quarter Ended September 30, 1996 Commission File Number 0-23360
COUNTRY WIDE TRANSPORT SERVICES, INC.
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(Exact name of registrant as specified in charter)
DELAWARE 95-4105996
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
325 N. COTA STREET, CORONA, CALIFORNIA 91270
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(Address of principal executive offices) (Zip Code)
(909) 549-6000
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(Registrant's telephone number, including area code)
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(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requires for the past 90 days. Yes X No
----- -----
The number of common stock outstanding as of October 31, 1996 was
4,800,487.
1
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COUNTRY WIDE TRANSPORT SERVICES, INC.
AND CONSOLIDATED SUBSIDIARY COMPANIES
INDEX
Part I - Financial Information Page
- ------------------------------ ----
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets--September 30, 1996
and June 30, 1996 3
Condensed Consolidated Statements of Operations--Three
Months Ended September 30, 1996 and 1995 5
Condensed Consolidated Statements of Cash Flows--Three
Months Ended September 30, 1996 and 1995 7
Notes to Condensed Consolidated Financial Statements 9
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 11
Part II - Other Information
Item 5. Other Information 13
Item 6. Exhibits and Reports on Form 8-K 13
Signatures 14
2
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COUNTRY WIDE TRANSPORT SERVICES, INC.
AND CONSOLIDATED SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands)
September 30, June 30,
1996 1996*
--------- ---------
(Unaudited)
ASSETS
Current assets:
Cash $ 51 $ 37
Accounts receivable, net 5,168 5,199
Accounts receivable - miscellaneous 51 85
Driver advances 213 203
Notes receivable - current portion 15 --
Inventories 26 29
Prepaid expenses 352 380
--------- ---------
Total current assets 5,876 5,933
Property and equipment, net 3,336 3,580
Note receivable - long-term 25 --
Other assets:
Deposits 283 270
Excess of purchase price over fair value of net
assets acquired, net 4,778 4,825
--------- ---------
Total assets $ 14,298 $ 14,608
--------- ---------
--------- ---------
* Condensed from audited financial statements.
Continued
3
<PAGE>
COUNTRY WIDE TRANSPORT SERVICES, INC.
AND CONSOLIDATED SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands)
September 30, June 30,
1996 1996*
--------- ---------
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable and current portion
of long-term debt $ 4,460 $ 4,329
Accounts payable and accrued liabilities 5,524 5,584
--------- ---------
Total current liabilities 9,984 9,913
Long-term debt, less current portion 2,374 2,616
Liabilities in excess of assets of discontinued
operations 134 177
--------- ---------
Total liabilities 12,492 12,706
--------- ---------
Stockholders' equity:
Preferred stock, $.01 par value, 5,000,000
shares authorized, issuable in series,
none issued -- --
Common stock, $.02 par value, 10,000,000
shares authorized, 4,801,000 shares issued
and outstanding at September 30 and
June 30, 1996, respectively 96 96
Warrants 40 40
Additional paid-in capital 6,763 6,763
Retained earnings (5,093) (4,997)
--------- ---------
Total stockholders' equity 1,806 1,902
--------- ---------
Total liabilities and
stockholders' equity $ 14,298 $ 14,608
--------- ---------
--------- ---------
* Condensed from audited financial statements.
The accompanying notes are an integral part of these
condensed consolidated financial statements.
4
<PAGE>
COUNTRY WIDE TRANSPORT SERVICES, INC.
AND CONSOLIDATED SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In Thousands, except Per Share Data)
Three Months Ended
September 30,
------------------------
1996 1995
--------- ---------
Transportation revenue $ 10,547 $ 12,950
--------- ---------
Operating costs and expenses:
Purchased transportation 7,267 9,034
Salaries and related expenses 1,357 1,463
Operating expenses 844 1,168
Revenue equipment rentals 371 485
General supplies and expenses 385 559
Depreciation and amortization 259 331
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Total operating costs and expenses 10,483 13,040
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Operating income (loss) 64 (90)
Other income (expense):
Interest expense (175) (158)
Interest income -- 33
Gain on disposition of assets 23 21
--------- ---------
Net (loss) from continuing operations before
provision for income taxes, discontinued
operations and extraordinary item (88) (194)
Provision for income tax 8 --
--------- ---------
Net (loss) from continuing operations $ (96) $ (194)
--------- ---------
Continued
5
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COUNTRY WIDE TRANSPORT SERVICES, INC.
AND CONSOLIDATED SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In Thousands, except Per Share Data)
Three Months Ended
September 30,
--------------------------
1996 1995
----------- -----------
Net (loss) from continuing operations $ (96) $ (194)
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Discontinued operations:
(Loss) from operations of discontinued
business segments, net of applicable
income tax (expense) of ($25) for the
three months ended September 30,
1995 (note 5) -- (762)
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Net (loss) before extraordinary item (96) (956)
Extraordinary item:
Gain on forgiveness of debt of
discontinued operations, net of
applicable income tax expense of
$1,630 (note 5) -- 2,370
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Net income (loss) $ (96) $ 1,414
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Income (loss) per common share:
Continuing operations $ (.02) $ (0.04)
Discontinued operations -- (0.16)
Extraordinary item -- 0.50
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Net Income (loss) per common share $ (.02) $ 0.30
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Weighted average number of common shares 4,800,487 4,800,487
----------- -----------
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The accompanying notes are an integral part of these
condensed consolidated financial statements.
6
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COUNTRY WIDE TRANSPORT SERVICES, INC.
AND CONSOLIDATED SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In Thousands)
Three Months Ended
September 30,
----------------------
1996 1995
-------- --------
Cash flows from operating activities:
Net (loss) from continuing operations $ (96) $ (194)
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 259 331
(Gain) on disposition of assets (23) (21)
Provision for uncollectible accounts receivable 8 34
(Increase) decrease in
Accounts receivable 26 126
Accounts receivable - miscellaneous 34 (12)
Driver advance (9) (22)
Inventories 3 (1)
Prepaid expenses 28 66
Deposits (13) (86)
Increase (decrease) in:
Accounts payable and accrued liabilities (60) 868
Liabilities in excess of discontinued operations (43) --
-------- --------
Net cash provided by operating activities from
continuing operations 114 1,089
-------- --------
Net (loss) from discontinued operations (762)
Depreciation and amortization -- 8
Gain on disposition of assets -- 14
Changes in operating assets -- 180
-------- --------
Net cash (used in) operating activities
from discontinued operations -- (560)
-------- --------
Cash flows from investing activities:
Increase in notes receivable -- (29)
Collections on notes receivable 1 --
Additions to property and equipment (60) (165)
Proceeds from disposal of property and equipment 70 792
-------- --------
Net cash provided by investing activities 11 598
-------- --------
Continued
7
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COUNTRY WIDE TRANSPORT SERVICES, INC.
AND CONSOLIDATED SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In Thousands)
Three Months Ended
September 30,
-------------------------
1996 1995
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Cash flows from financing activities:
Principal payments on borrowings $ (11,299) $ (16,033)
Net cash borrowings from line of credit 11,188 14,875
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Net cash (used in) financing activities (111) (1,158)
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Increase (decrease) in cash 14 (31)
Cash, beginning of period 37 57
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Cash, end of period $ 51 $ 26
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Supplemental disclosure of cash flow information:
Cash paid for:
Interest $ 153 $ 187
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Income Taxes $ 1 $ 9
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Noncash investing and financing transactions:
Purchase of property and equipment with debt or
reduction of receivable $ -- $ 1,668
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Property and equipment sold for receivable $ 41 $ 10
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The accompanying notes are an integral part of these
condensed consolidated financial statements.
8
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COUNTRY WIDE TRANSPORT SERVICES, INC.
AND CONSOLIDATED SUBSIDIARY COMPANIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting policies followed by the Company are set forth in Note 1 to
the Company's consolidated financial statements included in the Company's
Annual Report to Stockholders for the year ended June 30, 1996.
2. STATEMENT OF INFORMATION FURNISHED
The accompanying unaudited consolidated financial statements have been
prepared in accordance with Form 10-Q instructions and in the opinion of
management contain all adjustments (consisting of only normal recurring
accruals) necessary to present fairly the financial position as of
September 30, 1996, the results of operations for the three months ended
September 30, 1996 and 1995 and the cash flows for the three months ended
September 30, 1996 and 1995. The results of operations for the three month
periods ended September 30, 1996 and 1995 are not necessarily indicative of
the results to be expected for the full year. These results have been
determined on the basis of generally accepted accounting principles and
practices applied consistently with those used in the preparation of the
Company's 1996 Annual Report.
Certain information and footnote disclosures normally included in financial
statements presented in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to the rules and
regulations of the Securities and Exchange Commission.
3. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following (000 omitted):
September
30, June 30, Estimated
1996 1996 Useful Lives
--------- -------- -------------
Revenue equipment $ 3,741 $ 3,834 5 to 7 years
Service cars 11 11 5 years
Furniture and office equipment 516 505 4 to 5 years
Leasehold improvements 142 137 life of lease
Machinery and equipment 29 29 5 years
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4,439 4,516
Less accumulated depreciation
and amortization (1,103) (936)
--------- --------
$ 3,336 $ 3,580
--------- --------
--------- --------
9
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4. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts payable and accrued liabilities consisted of the following (000
omitted):
September 30, June 30,
1996 1996
------------ ----------
Accounts payable $ 1,178 $ 1,390
Accrued insurance 445 469
Accrued purchased transportation 2,990 2,766
Other accrued expenses 911 959
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$ 5,524 $ 5,584
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5. DISCONTINUED OPERATIONS
Having experienced significant losses in the produce sales segment, the
Company's Board of Directors decided on June 26, 1995 to discontinue the
entire segment through an orderly liquidation process which they estimated
would occur over the subsequent two month period. Immediately thereafter,
the Company commenced to close the operations and on September 18, 1995 made
a General Assignment of all assets of its subsidiary, Nationwide Produce
Co., for the pro rata benefit of all creditors of the subsidiary. Revenues
applicable to the discontinued product sales segment were approximately
$52,953,000, $22,723,000, and $20,053,000 for the years ended June 30,
1995, 1994, and 1993, respectively.
During the three months ended September 30, 1995, the Company recognized a
net gain to the extent of unpaid liabilities of Nationwide Produce Co. (not
guaranteed or assumed by the Company) in excess of assets and operating
losses from July 1, 1995 to date of liquidation amounting to $4,000,000
before income tax.
10
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Net loss from continuing operations for the quarter ended September 30, 1996
amounted to $96,000 compared to $194,000 for the prior year period. The
decreased loss was primarily attributable to an increase in pricing and cost
reduction measures during the current quarter.
First quarter operating revenue decreased 18.6% to $10,547,000 from $12,950,000
for the first quarter of 1995. The decrease reflects a reduction in the
Company's tractor fleet from 214 units at September 30, 1995 to 105 units at
September 30, 1996 which resulted in a decrease in loaded miles from 5,999,000
to 4,093,000 for the period. The reduction in the number of units reflects the
Company's efforts to downsize the operations by concentrating the freight lanes.
Operating revenue for the Company's Vertex Transportation, Inc. subsidiary
increased $164,000 to $7,328,000 for the three months ended September 30, 1996.
Vertex is a full service freight forwarder providing its customers
transportation services including truckload, less than truckload distributation,
warehousing, consolidations, and multi-modal transportation.
During the first quarter demand for the Company's temperature-controlled
truckload services weakened due to increased competition in produce-related
freight while pricing increased 2.1% or $.024 per mile compared with the prior
year period.
Operating costs for the first quarter decreased by $2,557,000 from the prior
year period. As a percentage of sales, operating costs for the quarter decreased
1.3% from the prior year period and is primarily attributable to a $164,000
decrease in revenue equipment rentals resulting from a reduction of the
Company's trailer fleet, as well as a 1% reduction in operating expenses
expressed as a percentage of sales.
Depreciation and amortization expense and interest expense for the quarter ended
September 30, 1996 were $259,000 and $175,000 respectively, as compared with
$331,000 and $158,000, respectively, in the comparable 1995 period. The decrease
in depreciation and amortization is attributable to a decrease in capitalized
trailers and the increase in interest expense reflects the Company's higher
incremental borrowing rates.
Having experienced significant losses in the produce segment, the Company's
Board of Directors decided on June 26, 1995 to wind-down and discontinue the
entire product sales segment through an orderly liquidation which was estimated
to occur over the subsequent two month period. Immediately thereafter, the
Company commenced to close the operations and on September 18, 1995 made a
General Assignment of all assets of its subsidiary, Nationwide Produce Co., for
the pro rata benefit of all creditors of the subsidiary. During the quarter
ended September 30, 1995, the Company's product sales segment generated a net
loss of $762,000. Results of operations for the product sales segment have been
classified as discontinued operations in the Company's financial statements for
all periods presented.
During the three months ended September 30, 1995, the Company recognized a net
gain to the extent of unpaid liabilities of Nationwide Produce Co. (not
guaranteed or assumed by the Company) in excess of assets and operating losses
from July 1, 1995 to date of liquidation amounting to $4,000,000 before income
tax.
11
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LIQUIDITY AND CAPITAL RESOURCES
Pursuant to a loan agreement with a commercial bank dated June 30, 1996, the
Company utilizes a credit facility which provides for maximum outstanding
borrowings of $4.75 million reducing to $4.65 million at October 31, 1996.
Borrowings are limited to 80% of eligible accounts and at September 30, 1996,
the outstanding indebtedness under the credit facility was $3,815,000 and is
classified as a current liability in the Company's financial statements. The
agreement bears interest at the banks prime rate plus 3% and expires on
December 31, 1996. At September 30, 1996 the Company was in violation of
certain covenants of the Agreement and management has commenced negotiations
with other lending institutions in order to have alternative financing in place
upon expiration of this agreement.
At September 30, 1996, the Company's ratio of current assets to current
liabilities and its debt to equity were 0.6:1 and 6.9:1, respectively, as
compared to 0.6:1 and 6.7:1, respectively at June 30, 1996.
At September 30, 1996 no significant capital expenditures were planned or
committed.
The Company ended the September 30, 1996 period with $51,000 of cash and
negative working capital of $4,108,000. Based upon the Company's expected cash
flow from operations and funds available under existing or substitute credit
facilities, management believes that the Company's capital resources are
sufficient to meet its presently anticipated operating needs and capital
expenditure requirements. However, should these resources provide inadequate or
unavailable, the Company may be required to seek additional financing through
capital investment.
12
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COUNTRY WIDE TRANSPORT SERVICES, INC.
AND CONSOLIDATED SUBSIDIARY COMPANIES
Part II. Other Information
ITEM 1. LEGAL INFORMATION
During the month of September 1995, the Company's transportation
subsidiary, CW Truck, had a cargo claim that approximated $600,000
filed against it by one of its customers. The insurance carrier
citing certain exceptions in the cargo policy declined to pay the
claim and referred the issue to litigation on February 27, 1996.
The Company initiated legal action against the insurance carrier and
its agent. The customer additionally filed a cross claim against the
Company. Management feels that the Company's suit will be successful.
Therefore, no contingent liability has been recorded in the Company's
financial statements as of September 30, 1996.
ITEM 5. OTHER INFORMATION
During the fiscal year ended June 30, 1995, the Company discontinued
its product sales segment which was operated by the Company's
wholly-owned subsidiary, Nationwide Produce Co., since July 1992 when
the Company acquired all of the outstanding stock of Nationwide from
Martrade Ltd. The Company's discontinuance of the product sales
segment culminated in the filing of a General Assignment during
September 1995 of all assets of Nationwide Produce Co. for the pro
rata benefit of all creditors of the subsidiary.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits: None
(b) Reports on Form 8-K:
1. Report on Form 8-K dated September 23, 1996 regarding the
letter of intent for the acquisition of the Company by
Continental American Transportation, Inc.
13
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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.
COUNTRY WIDE TRANSPORT SERVICES, INC.
-------------------------------------
Registrant
DATED: November 14, 1996 /s/Timothy Lepper
-------------------------------------
Timothy Lepper
President and Chief Executive Officer
DATED: November 14, 1996 /s/Nathan W. Gordon
-------------------------------------
Nathan W. Gordon
Chief Financial Officer
14
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<PERIOD-START> JUL-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 51
<SECURITIES> 0
<RECEIVABLES> 5,347
<ALLOWANCES> 128
<INVENTORY> 26
<CURRENT-ASSETS> 5,876
<PP&E> 4,439
<DEPRECIATION> 1,103
<TOTAL-ASSETS> 14,298
<CURRENT-LIABILITIES> 9,984
<BONDS> 2,374
0
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<COMMON> 96
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