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 March 31, 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 incorporation (I.R.S. Employer
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 April 30, 1998 was
4,248,100
<PAGE>
COUNTRY WIDE TRANSPORT SERVICES, INC.
and Consolidated Subsidiary Companies
INDEX
Part I - Financial Information Page
- ------------------------------ ----
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets--March 31, 1998
and June 30, 1997 3
Condensed Consolidated Statements of Operations--
Three Months Ended March 31, 1998 and 1997, and
Nine Months Ended March 31, 1998 and 1997 4
Condensed Consolidated Statements of Cash Flows--Nine
Months Ended March 31, 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
Part II - Other Information
- ---------------------------
Item 5. Other Information 10
Item 6. Exhibits and reports on form 8K 10
Signatures 11
2
<PAGE>
COUNTRY WIDE TRANSPORT SERVICES, INC.
and Consolidated Subsidiary Companies
Condensed Consolidated Balance Sheets
(In Thousands)
<TABLE>
<CAPTION>
March 31, June 30,
1998 1997*
------- -------
ASSETS (Unaudited)
<S> <C> <C>
Current assets:
Cash $ 8 $ 10
Accounts receivable, net 4,481 4,009
Accounts receivable, miscellaneous 48 47
Driver advances 26 16
Prepaid expenses 69 49
------- -------
Total current assets 4,632 4,131
Property and equipment, net 177 110
Other assets:
Deposits 17 8
Excess of purchase price over fair market value of net assets acquired, net 2,549 2,638
------- -------
Total Assets $ 7,375 $ 6,887
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable and current portion of long-term debt $ -- $ 160
Accounts payable and accrued liabilities 4,561 4,612
Liabilities in excess of assets of discontinued subsidiary 326 404
Liabilities in excess of assets of discontinued operations 42 123
------- -------
Total current liabilities 4,929 5,299
Long-term debt, less current portion 1,970 1,748
Total liabilities 6,899 7,047
------- -------
Stockholders' equity (deficit):
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, 4,248,000 shares
issued and outstanding at March 31, 1998 and June 30, 1997, respectively 425 425
Additional paid-in capital 8,110 8,110
Retained earnings (8,059) (8,695)
------- -------
Total stockholders' equity (deficit) 476 (160)
------- -------
Total liabilities and stockholders' equity (deficit) $ 7,375 $ 6,887
======= =======
</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)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
March 31, March 31,
--------------------------- ---------------------------
1998 1997 1998 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Transportation revenue $ 8,291 $ 6,149 $ 25,444 $ 26,737
----------- ----------- ----------- -----------
Operating costs and expenses:
Purchased transportation 7,280 5,277 22,346 19,970
Salaries and related expenses 515 423 1,416 3,161
Operating expenses 46 33 135 1,131
Revenue equipment rentals -- -- -- 827
General supplies and expenses 195 182 645 2,379
Depreciation and amortization 42 41 125 2,592
----------- ----------- ----------- -----------
Total operating costs and expenses 8,078 5,956 24,667 30,060
----------- ----------- ----------- -----------
Operating income (loss) 213 193 777 (3,323)
Other income (expense):
Interest expense (48) (24) (149) (375)
Other, net 74 -- 73
Gain (loss) on disposition of assets -- -- -- (406)
----------- ----------- ----------- -----------
Income (loss) before provision for income taxes 239 169 701 (4,104)
Income tax expense 15 13 73 34
----------- ----------- ----------- -----------
Net income (loss) $ 224 $ 156 $ 628 $ (4,138)
=========== =========== =========== ===========
Earnings (loss) per common share:
Basic $ 0.05 $ 0.16 $ 0.15 $ (4.31)
=========== =========== =========== ===========
Diluted $ 0.04 $ 0.16 $ 0.13 $ (4.31)
=========== =========== =========== ===========
Weighted average number of common shares 4,248,100* 960,097* 4,248,100* 960,097*
=========== =========== =========== ===========
</TABLE>
* Reflects May 15, 1997 one for five reverse split
The accompanying notes are an integral part of these condensed financial
statements.
4
<PAGE>
COUNTRY WIDE TRANSPORT SERVICES, INC.
and Consolidated Subsidiary Companies
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In Thousands)
<TABLE>
<CAPTION>
Nine Months Ended
March 31,
--------------------
1998 1997
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 628 $ (4,138)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 125 2,592
(Gain) Loss on disposal of assets -- 406
Provision for uncollectible accounts receivable -- (78)
(Increase) decrease in:
Accounts receivable (473) 1,821
Accounts receivable, miscellaneous (1) 37
Drivers advances (10) 192
Inventories -- 29
Prepaid expenses (20) 317
Deposits 270
Other assets -- --
Increase (decrease) in:
Notes Payable and Current Portion of Long Term Debt (160) --
Accounts payable and accrued liabilities (52) (14)
Liabilities in excess of assets of discontinued subsidiaries (78) 1,022
Liabilities in excess of assets of discontinued operations (81) (125)
-------- --------
Net cash provided by operating activities (122) 2,331
-------- --------
Cash flows from investing activities:
Collections on notes receivable -- 1
Additions to property and equipment (102) (90)
Proceeds from disposal of property and equipment -- 93
-------- --------
Net cash provided by (used in) investing activities (102) 4
-------- --------
Cash flows from financing activities:
Principal payments on borrowings $(25,102) $(29,925)
Proceeds from borrowings 25,324 27,558
-------- --------
Net cash (used in) financing activities 222 (2,367)
-------- --------
(Decrease) in cash (2) (32)
Cash, beginning of period 10 37
-------- --------
Cash, end of period $ 8 $ 5
======== ========
Supplemental disclosure of cash flow information:
Cash paid for:
Interest $ 123 $ 375
======== ========
Income taxes $ 73 $ 34
======== ========
</TABLE>
The accompanying notes are an integral part of these condensed 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, 1997
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 March
31, 1998, the results of operations for the three months and nine months
ended March 31, 1998 and 1997 and the cash flows for the nine months ended
March 31, 1998 and 1997. The results of operations for the three and nine
month periods ended March 31, 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 1997 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):
<TABLE>
<CAPTION>
March 31, June 30 Estimated
1998 1997 Useful Lives
-------- -------- ---------------
<S> <C> <C> <C>
Furniture and office equipment $ 224 $ 144 4 to 5 years
Leasehold improvements 94 72 life of lease
-------- --------
318 216
Less accumulated depreciation
and amortization (141) (106)
--------- ---------
$ 177 $ 110
======== ========
</TABLE>
4. Accounts Payable and Accrued Liabilities
Accounts payable and accrued liabilities consisted of the following (000
omitted):
March 31 June 30
1998 1997
------ ------
Accounts payable $2,267 $2,331
Accrued purchased transportation 1,821 1,448
Other accrued expenses 473 833
------ ------
$4,561 $4,612
====== ======
6
<PAGE>
5. Earnings Per Share (In Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
For the Three For the Nine
Months Ended Months Ended
March 31, March 31,
----------------------- -----------------------
1998 1997 1998 1997
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Basic Earnings Per Share
Net income (loss) $ 224 $ 156 $ 628 $ (4,138)
Less - preferred stock dividends -- -- -- --
---------- ---------- ---------- ----------
Net income applicable to
common shareholders $ 224 $ 156 $ 628 $ (4,138)
========== ========== ========== ==========
Weighted average number of common shares 4,248,100 960,000 4,248,100 960,000
========== ========== ========== ==========
Basic Earnings per Share 0.05 0.16 0.15 (4.31)
========== ========== ========== ==========
Diluted Earnings per Share
Net income from basic income per
common share 224 156 628 (4,138)
Add:
preferred stock dividend -- -- -- --
---------- ---------- ---------- ----------
Net income for diluted earnings per share 224 156 628 (4,138)
========== ========== ========== ==========
Weighted average number of shares used in
calculating basic earnings per common share 4,248,100 960,000 4,248,100 960,000
Add - common equivalent shares (determined
using the "treasury stock" method) representing
shares issuable upon exercise of options 755,007 -- 736,059 --
---------- ---------- ---------- ----------
Weighted average number of shares used in
calculation of diluted earnings per share 5,003,107 960,000 4,984,159 960,000
========== ========== ========== ==========
Diluted Earnings per Share $ 0.04 $ 0.16 $ 0.13 $ (4.31)
========== ========== ========== ==========
</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 March 31, 1998, increased 43.4% to
$223,229 from $155,622 for the prior year period. For the nine month period
ended March 31, 1998, net income improved to $628,008 from a loss of
$(4,138,193) for the prior year period. These results were due to the
liquidation of a trucking subsidiary effective December 31, 1996 and improved
results from the Company's logistics subsidiary, Vertex Transportation, Inc.
Transportation revenue for the three month period ended March 31, 1998,
increased 34.9% to $8,291,391 from $6,148,516 for the same three month period of
fiscal year 1997, while transportation revenue decreased 4.8% to $25,443,909
from $26,736,558 for the nine months ended March 31, 1998. The reduction of
revenue for the nine month period ended March 31, 1998, as compared to the
previous period, was a result of the liquidation of the trucking subsidiary
effective December 31, 1996, which had revenue during this nine month period of
$7,587,771.
Operating costs for the three month period ended March 31, 1998, increased 35.6%
to $8,078,019 from $5,955,833 for the prior year period. This increase was due
to the increase in business levels. For the nine month period ended March 31,
1998, operating costs decreased 17.9% to $24,666,500 from $30,060,000 for the
prior year period. This decrease was due to the liquidation of the trucking
subsidiary during the prior year period. As a percentage of sales, operating
costs for the three month period ended March 31, 1998, increased 5.4% from the
prior year period and for the nine month period ended March 31, 1998, decreased
15.1% for the comparable year period. This change is primarily attributable to
the discontinuance of the trucking subsidiary partially offset by increased
purchase transportation costs inherit in the logistics business.
Depreciation and amortization expense for the three month period and nine month
period ended March 1998, was $42,338 and $124,615 as compared with $41,138 and
$2,591,277 for the respective prior year periods. Interest expense for the three
month period ended March 31, 1998, increased to $48,108 from $24,048 for the
prior year period and decreased to $149,388 from $374,933 for the respective
nine month period. The decrease in depreciation and amortization expense in the
nine month period is due to the liquidation of the trucking subsidiary on
December 31, 1996, and the sale of the revenue equipment. The increase in
interest expense during the three month period was due to the increase in
business and acceleration of purchase transportation while the decrease during
the nine month period is directly related to the aforementioned liquidation of
the trucking subsidiary.
Having experienced significant losses in its trucking operation, Country Wide
Truck Service, Inc., a Company subsidiary, discontinued its operation on
December 31, 1996, and began an orderly liquidation process. On December 31,
1996, a General Assignment of all assets of CW truck was made for the pro rata
benefit of all creditors. In conjunction with the General Assignment, on
December 31, 1996, all of the rolling stock assets were sold for the outstanding
debt on the equipment. The company maintains a continuing corporate guarantee on
the debt secured by the rolling stock. Revenues applicable to the liquidated
subsidiary for the nine month period ended March 31, 1997, were $7,587,000.
During the nine month period ended March 31, 1997 CW Truck generated a loss of
$(4,442,000). Results of operation for CW Truck have been classified as
continuing operations in the Company's financial statement for all periods
presented.
The increase in sales for the Company's Vertex Transportation, Inc. subsidiary
for the three month period ended March 31, 1998, to $8,291,391 from $6,149,000
in the prior year period resulted in an increase in that subsidiary's net income
of 90% to $281,152 from $148,014. The nine month period ended March 31, 1998,
sales increased 21.3% to $25,443,909 from $20,980,772 in the prior year period
resulting in an increase in that subsidiary's net income of 80% to $929,937 from
$516,591 for the prior year period.
8
<PAGE>
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 are
limited to 80% of eligible accounts receivable. The agreement bears an interest
rate of the bank's prime rate plus 2 1/2%. At March 31, 1998 the Company had
borrowings of $1,969,869 and unused borrowing capacity of $1,300,003.
At March 31, 1998, the Company's ratio of current assets to current liabilities
and its debt to equity were 0.9:1 and 4.1:1 respectively, as compared to 0.8:1
and (44):1 respectively at June 30, 1997.
The Company ended the March 31, 1998 period with $8,000 of cash and negative
working capital of $297,000. Based upon the Company's expected cash flow from
operations and funds available as of April 29, 1997, from it's new credit
facility, management believes that the Company's capital resources are
sufficient to meet its present and anticipated operating needs.
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
Effective December 16, 1997, the Securities and Exchange Commission declared
effective an S-2 Registration Statement which was filed on behalf of certain
selling shareholders as outlined in the S-2 Registration Statement. This
statement effectively registered 3,288,000 of the Company's common stock. After
this offering, the Company has outstanding 4,248,117 shares.
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: May 8, 1998 S/Timothy Lepper
-----------------------------
Timothy Lepper, President
Chief Executive Officer
Chief Financial Officer
and Principal Accounting Officer
11
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> MAR-31-1998
<CASH> 8
<SECURITIES> 0
<RECEIVABLES> 4,529
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 4,632
<PP&E> 318
<DEPRECIATION> 141
<TOTAL-ASSETS> 7,375
<CURRENT-LIABILITIES> 4,929
<BONDS> 0
0
0
<COMMON> 425
<OTHER-SE> 51
<TOTAL-LIABILITY-AND-EQUITY> 7,375
<SALES> 0
<TOTAL-REVENUES> 25,444
<CGS> 23,897
<TOTAL-COSTS> 24,667
<OTHER-EXPENSES> (73)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 149
<INCOME-PRETAX> 701
<INCOME-TAX> 73
<INCOME-CONTINUING> 628
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 628
<EPS-PRIMARY> .15
<EPS-DILUTED> .13
</TABLE>
