SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------------------------
FORM 10-Q
Quarter Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
----------------------------------------
For Quarter Ended September 30, 1998 Commission File Number 0-23360
COUNTRY WIDE TRANSPORT SERVICES, INC.
(Exact name of registrant as specified in charter)
DELAWARE 95-4105996
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
119 Despatch Drive, East Rochester, NY 14445
(Address of principal executive offices) (Zip Code)
(716) 381-5470
(Registrant's telephone number, including area code)
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 ___
The number of shares of common stock outstanding as of October 30, 1998 was
4,248,100
<PAGE>
COUNTRY WIDE TRANSPORT SERVICES, INC.
and Consolidated Subsidiary Companies
INDEX
<TABLE>
<CAPTION>
Part I - Financial Information Page
- ------------------------------ ----
<S> <C>
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets--September 30, 1998
and June 30, 1998 3
Condensed Consolidated Statements of Operations--Three Months Ended
September 30, 1998 and 1997 4
Condensed Consolidated Statements of Cash Flows--Three
Months Ended September 30, 1998 and 1997 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 8
Item 3. Quantitative and Qualitative Disclosures About Market Risk 9
Part II - Other Information
Item 5. Other Information 10
Item 6. Exhibits and reports on form 8K 10
Signatures 11
</TABLE>
2
<PAGE>
COUNTRY WIDE TRANSPORT SERVICES, INC.
and Consolidated Subsidiary Companies
Condensed Consolidated Balance Sheets
(In Thousands)
<TABLE>
<CAPTION>
September 30, June 30,
1998 1998*
------------- --------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash $ 12 $ 6
Accounts receivable, net 4,900 5,548
Accounts receivable, miscellaneous 91 112
Driver advances 17 13
Prepaid expenses 77 38
------- -------
Total current assets 5,097 5,717
Property and equipment, net 281 263
Other assets:
Deposits 34 34
Excess of purchase price over fair value of net assets acquired, net 2,489 2,518
------- -------
Total Assets $ 7,901 $ 8,532
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 4,693 $ 5,088
Liabilities in excess of assets of discontinued subsidiary 127 150
------- -------
Total current liabilities 4,820 5,238
Long-term debt, less current portion 2,090 2,514
------- -------
Total liabilities 6,910 7,752
------- -------
Stockholders' equity :
Preferred stock, $.01 par value, 5,000,000 shares authorized,
issuable in series, none issued -- --
Common stock, $.10 par value, 6,000,000 shares authorized, 4,248,100 shares
issued and outstanding at Sept. 30, 98 and June 30, 1998, respectively 425 425
Additional paid-in capital 8,110 8,110
Accumulated deficit (7,544) (7,755)
------- -------
Total stockholders' equity 991 780
------- -------
Total liabilities and stockholders' equity $ 7,901 $ 8,532
======= =======
</TABLE>
* Condensed from audited financial statements.
The accompanying notes are an integral part of these
condensed consolidated financial statements.
3
<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,
----------------------------
1998 1997
----------- -----------
Revenue $ 9,381 $ 8,497
----------- -----------
Operating costs and expenses:
Purchased transportation 8,239 7,493
Salaries and related expenses 572 447
Operating expenses 39 44
General supplies and expenses 222 214
Depreciation and amortization 49 41
----------- -----------
Total operating costs and expenses 9,121 8,239
----------- -----------
Operating income 260 258
Other income (expense):
Interest expense (52) (45)
Other, net 3 --
----------- -----------
Income before provision for income taxes 211 213
Income tax expense -- 20
----------- -----------
Net income $ 211 $ 193
=========== ===========
Earnings per common share:
Basic $ 0.05 $ 0.05
=========== ===========
Diluted $ 0.04 $ 0.04
=========== ===========
Weighted average number of common
shares 4,248,100 4,248,100
=========== ===========
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 Cash Flows
(Unaudited)
(In Thousands)
<TABLE>
<CAPTION>
Three Months Ended
September 30,
--------------------
1998 1997
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 211 $ 193
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 49 41
(Increase) decrease in:
Accounts receivable 648 (1,353)
Accounts receivable, miscellaneous 21 3
Drivers advances (4) 2
Prepaid expenses (39) (4)
Deposits (1) --
Increase (decrease) in:
Accounts payable and accrued liabilities (395) 358
Liabilities in excess of assets of discontinued subsidiaries (23) --
Liabilities in excess of assets of discontinued operations -- (48)
-------- --------
Net cash provided by (used in) operating activities 467 (808)
-------- --------
Cash flows from investing activities:
Additions to property and equipment (37) (9)
-------- --------
Net cash used in investing activities (37) (9)
-------- --------
Cash flows from financing activities:
Principal payments on borrowings $(10,163) $ (7,195)
Proceeds from borrowings 9,739 8,012
-------- --------
Net cash provided by (used in) financing activities (424) 817
-------- --------
Increase in cash 6 --
Cash, beginning of period 6 10
-------- --------
Cash, end of period $ 12 10
======== ========
Supplemental disclosure of cash flow information:
Cash paid for:
Interest $ 52 $ 45
======== ========
Income taxes $ -- $ 16
======== ========
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated financial statements.
5
<PAGE>
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, 1998
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, 1998, the results of operations for the three months ended
September 30, 1998 and 1997 and the cash flows for the three months ended
September 30, 1998 and 1997. The results of operations for the three month
period ended September 30, 1998 and 1997 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 audited consolidated financial statements for the year ended June
30, 1998.
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
1998 1998 Useful Lives
------------- ------- ------------
4 to 5 years
Furniture and office equipment $ 303 $ 268 life of lease
Leasehold improvements 155 154
----- -----
458 422
Less accumulated depreciation
and amortization (177) (159)
----- -----
$ 281 $ 263
===== =====
4. Accounts Payable and Accrued Liabilities
Accounts payable and accrued liabilities consisted of the following (000
omitted):
September 30, June 30
1998 1998
------------- -------
Accounts payable $2,586 $2,913
Accrued purchased transportation 1,900 1,948
Other accrued expenses 207 227
------ ------
$4,693 $5,088
====== ======
6
<PAGE>
5. Earnings Per Share (In Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
For the Three Months Ended
September 30,
--------------------------
1998 1997
----------- -----------
<S> <C> <C>
Basic Earnings per Share
Net income $ 211,000 $ 193,000
Less - preferred stock dividends -- --
---------- ----------
Net income applicable to common shareholders $ 211,000 $ 193,000
========== ==========
Weighted average number of common shares 4,248,100 4,248,100
========== ==========
Basic Earnings per Share 0.05 0.05
========== ==========
Diluted Earnings per Share
Net income applicable to common shareholders 211,000 193,000
Add:
preferred stock dividend -- --
---------- ----------
Net income for diluted earnings per share 211,000 193,000
========== ==========
Weighted average number of shares use in
calculating basic earnings per common share 4,248,100 4,248,100
Add-common equivalent shares (determined
using the "treasury stock" method) representing
shares issuable upon exercise of options 757,273 735,073
---------- ----------
Weighted average number of shares used in
calculation of diluted earnings per share 5,005,373 4,983,173
========== ==========
Diluted Earnings per Share 0.04 0.04
========== ==========
</TABLE>
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
Net income for the three month period ended September 30, 1998 amounted to
$211,000 compared to net income of $193,000 for the prior year three month
period ended September 30, 1997, an increase of 9.3%. The improved results were
due to increased business levels at the Company's subsidiary, Vertex
Transportation, Inc.
Transportation revenue for the three months ended September 30, 1998, increased
10.4% to $9,381,000 from $8,497,000 for the prior year three month period ended
September 30, 1997. Net revenue percentage, after purchased transportation, for
the three months ended September 30, 1998 was 12.2% versus 11.8% for the
comparable prior year period.
Operating costs for the three month period ended September 30, 1998, increased
10.7% to $9,121,000 from $8,239,000 for the prior year three month period ended
September 30, 1997. This increase was due to the increase in business levels
coupled with additional investment in personnel levels to support future growth.
As a percentage of sales, operating costs for the three month period ended
September 30, 1998, increased 0.3% over the comparable prior year period as a
result of increased personnel cost to support future growth.
Depreciation and amortization expense for the three month period ended September
30, 1998, was $49,000 as compared to $41,000 for the comparable prior year
period. Interest expense for the three month period ended September 30,1998, was
$52,000 as compared to $45,000 for the comparable prior year period.
LIQUIDITY AND CAPITAL RESOURCES
On April 29, 1997, the Company, through its Vertex Transportation, Inc.
subsidiary, secured new financing with a commercial bank. The new facility is a
three year contract which allows for borrowing of up to $4,000,000 which is
limited to 80% of eligible accounts receivable. The agreement bears an interest
rate of the bank's prime rate plus 2 1/2%. At September 30, 1998 the Company had
borrowings of $2,089,945 and unused borrowing capacity of $1,193,166.
At September 30, 1998, the Company's ratio of current assets to current
liabilities and its debt to equity were 1.06:1 and 7.0:1 respectively, as
compared to 1.09:1 and 9.9:1 respectively at June 30, 1998.
The Company ended the September 30, 1998 period with $12,000 of cash and working
capital of $277,000. Based upon the Company's expected cash flow from operations
and funds available as of September 30, 1998, from it's credit facility,
management believes that the Company's capital resources are sufficient to meet
its present and anticipated operating needs.
Year 2000 Issues
The Company believes that the general nature of its business operations limits
its risks with respect to Year 2000 issues, with the state of readiness of its
own computer system being the key consideration. Most of the Company's business
is conducted by telephone, fax, e-mail, and mail communications with customers
and transportation providers. The Company's computer system is independent of
external computers, except for e-mail Internet communications. Generally orders
are taken by phone, and shipping arrangements are made by phone, with subsequent
written confirmations. The Company uses its internal computer system to keep
track of orders and related expenses and billing information and eventually to
provide accounting for the business transactions and the Company's financial
statements. All data used by the computer is entered at the Company's offices by
employees.
The independent developer of the Company's customized software system has
advised the Company that the system, including computer firmware, is Year 2000
compliant. In fall 1998 the Company will be administering testing scenarios.
8
<PAGE>
If the computer system needed even major overhaul in order to become Year 2000
compliant, the Company believes that necessary expense and time will be
allocated to do it.
The Company believes that Year 2000 problems that its customers might experience
are as likely to increase the Company's business and results of operations as
they are to decrease them. If any customers whose shipping needs are
significantly managed by computers do in fact experience Year 2000 problems,
they probably would need to use freight forwarders more, in order to find
available carriers who can make timely deliveries. Even with that increase in
business, of course, problems with finding, negotiating, and managing the
shipments and then billing and collecting for them could result in the Company
experiencing higher costs and delayed receipts on billings, thereby negatively
affecting margins on Company business.
The Company believes that Year 2000 problems that the transportation providers
might experience could generally impair the availability of transportation and
the efficiency with which rolling stock is used. This problem, too, appears as
likely to increase Company business and results of operations as to decrease
them, with the carriers becoming more dependent on freight forwarders for
finding and arranging ways to fill the rolling stock for various trips. With
such a less efficient system, of course, the Company's overhead probably would
increase, thereby negatively affecting margins on Company business.
Lastly, the company also believes that it does not have significant exposure to
embedded technology problems, except for possible problems that could have
widespread effects. The Company's offices are in a stand-alone, single story
building with basic utilities and HVAC and security systems, each which could be
replaced without material expense to the Company. Thus, the Company's primary
exposure to embedded technology problems appears to focus on communications and
utilities. If electricity became unavailable or erratic, or if telephone, fax,
e-mail, and/ or mail systems became unusable or erratic, the Company might have
severe difficulties in maintaining its business operations. The Company does not
have a contingency plan with respect to a possible loss of electricity,
telephone, or mail systems.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
9
<PAGE>
COUNTRY WIDE TRANSPORT SERVICES, INC.
and Consolidated Subsidiary Companies
Part II.
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) Reports on Form 8-K:
1. None.
(B) Exhibits:
1. None
10
<PAGE>
COUNTRY WIDE TRANSPORT SERVICES, INC.
and Consolidated Subsidiary Companies
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on it's behalf by the
undersigned thereunto duly authorized.
COUNTRY WIDE TRANSPORT SERVICES, INC.
Registrant
DATED: November 9, 1998 /S/ Timothy Lepper
Timothy Lepper, President
Chief Executive Officer
Chief Financial Officer
and Principal Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JUL-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 12
<SECURITIES> 0
<RECEIVABLES> 5067
<ALLOWANCES> 75
<INVENTORY> 0
<CURRENT-ASSETS> 5097
<PP&E> 459
<DEPRECIATION> 178
<TOTAL-ASSETS> 7901
<CURRENT-LIABILITIES> 4820
<BONDS> 0
0
0
<COMMON> 425
<OTHER-SE> 566
<TOTAL-LIABILITY-AND-EQUITY> 7901
<SALES> 9381
<TOTAL-REVENUES> 9381
<CGS> 8843
<TOTAL-COSTS> 9121
<OTHER-EXPENSES> (3)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 52
<INCOME-PRETAX> 211
<INCOME-TAX> 0
<INCOME-CONTINUING> 211
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 211
<EPS-PRIMARY> .050
<EPS-DILUTED> .043
</TABLE>
