<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
-------------------
For Quarter Ended December 31, 1997 Commission File Number 0-23360
COUNTRY WIDE TRANSPORT SERVICES, INC.
- ------------------------------------------------------------------------------
(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.)
119 Despatch Drive, East Rochester, New York 14445
- ------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(716) 381-5470
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(Registrant's telephone number, including area code)
- ------------------------------------------------------------------------------
(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 shares of Common Stock outstanding as of February 2, 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--December 31, 1997
and June 30, 1997 3
Condensed Consolidated Statements of Operations--Three
Months and Six Months Ended December 31, 1997 and 1996 4
Condensed Consolidated Statements of Cash Flows--Six
Months Ended December 31, 1997 and 1996 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations 10
Item 3. Quantitative and Qualitative Disclosures about Market Risk 11
PART II - OTHER INFORMATION
Item 5. Other Information 12
Item 6. Exhibits and Reports on Form 8-K 12
Signatures 13
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COUNTRY WIDE TRANSPORT SERVICES, INC.
AND CONSOLIDATED SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands)
<TABLE>
<CAPTION>
December 31, June 30,
1997 1997*
------------ --------
(Unaudited)
ASSETS
<S> <C> <C>
Current assets:
Cash $ 4 $ 10
Accounts receivable, net 5,270 4,009
Accounts receivable - officers and employees 42 47
Driver advances 18 16
Prepaid expenses 53 49
------- -------
Total current assets 5,387 4,131
Property and equipment, net 120 110
Other assets:
Deposits 8 8
Excess of purchase price over fair value of net
assets acquired, net 2,578 2,638
------- -------
Total assets $ 8,093 $ 6,887
------- -------
------- -------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable and current portion of long-term debt $ 13 $ 160
Accounts payable and accrued liabilities 4,533 4,612
Liabilities in excess of assets of discontinued subsidiary 348 404
Liabilities in excess of assets of discontinued operations 88 123
------- -------
Total current liabilities 4,982 5,299
Long-term debt, less current portion 2,858 1,748
------- -------
Total liabilities 7,840 7,047
------- -------
Stockholders' equity:
Preferred stock, $.01 par value, 5,000,000 shares authorized,
issuable in series, none issued -- --
Common stock, $.10 par value, 30,000,000 and 10,000,000 shares
authorized, 4,248,000 shares issued and outstanding
at December 31 and June 30, 1997 425 425
Additional paid-in capital 8,110 8,110
Retained earnings (deficit) (8,282) (8,695)
------- -------
Total stockholders' equity (deficit) 253 (160)
------- -------
Total liabilities and stockholders' equity $ 8,093 $ 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 Six Months Ended
December 31, December 31,
------------------ -------------------
1997 1996 1997 1996
------- -------- -------- --------
<S> <C> <C> <C> <C>
Transportation revenue $ 8,656 $ 10,039 $ 17,153 $ 20,586
------- -------- -------- --------
Operating costs and expenses:
Purchased transportation 7,572 7,426 15,066 14,693
Salaries and related expenses 455 1,381 901 2,738
Operating expenses 45 1,530 89 2,374
Revenue equipment rentals -- 456 -- 827
General supplies and expenses 236 536 451 921
Depreciation and amortization 41 2,291 82 2,550
------- -------- -------- --------
Total operating costs and expenses 8,349 13,620 16,589 24,103
------- -------- -------- --------
Operating income / (loss) 307 (3,581) 564 (3,517)
Other income (expense):
Interest expense (57) (176) (101) (351)
Interest income -- -- -- --
Gain on disposition of assets -- (429) -- (406)
------- -------- -------- --------
Income (loss) before provision for
income taxes 250 (4,186) 463 (4,274)
Provision for income tax 38 13 58 21
------- -------- -------- --------
Net income (loss) $ 212 $ (4,199) $ 405 $ (4,295)
------- -------- -------- --------
------- -------- -------- --------
Basic earnings (loss) per common share:
Continuing operations $ 0.05 $ (4.37) $ 0.10 $ (4.47)
------- -------- -------- --------
Net Income (loss) per common share $ 0.05 $ (4.37) $ 0.10 $ (4.47)
------- -------- -------- --------
------- -------- -------- --------
Diluted earnings (loss) per common share:
Continuing operations $ 0.04 $ (4.37) $ 0.08 $ (4.47)
------- -------- -------- --------
Net Income (loss) per common share $ 0.04 $ (4.37) $ 0.08 $ (4.47)
------- -------- -------- --------
------- -------- -------- --------
Weighted average number of common shares 4,248,100* 960,000* 4,248,100* 960,000*
--------- ------- --------- -------
--------- ------- --------- -------
</TABLE>
* Reflects May 15, 1997 one for five reverse stock split
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>
Six Months Ended
December 31,
----------------
1997 1996
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) from continuing operations $ 405 $ (4,295)
Adjustments to reconcile net (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization 82 2,550
(Gain) Loss on disposition of assets -- 406
Provision for uncollectible accounts receivable -- 3
(Increase) decrease in
Accounts receivable (1,261) 404
Accounts receivable - miscellaneous 5 (61)
Driver advance (2) 189
Inventories -- 7
Prepaid expenses (4) 323
Deposits -- (56)
Increase (decrease) in:
Notes payable - current portion 13 --
Accounts payable and accrued liabilities (239) 1,386
Liabilities in excess of discontinued subsidiary (56) --
Liabilities in excess of discontinued operations (35) (83)
-------- --------
Net cash provided by (used in) operating
activities (1,092) 773
-------- --------
Cash flows from investing activities:
Collections on notes receivable -- 1
Additions to property and equipment (24) (113)
Proceeds from disposal of property and equipment -- 93
-------- --------
Net cash used in investing activities (24) (19)
-------- --------
Cash flows from financing activities:
Principal payments on borrowings $(15,975) $(22,307)
Borrowings from line of credit 17,085 21,521
-------- --------
Net cash provided by (used in) financing activities 1,110 (786)
-------- --------
Decrease in cash (6) (32)
Cash, beginning of period 10 37
-------- --------
Cash, end of period $ 4 $ 5
-------- --------
-------- --------
Supplemental disclosure of cash flow information:
Cash paid for:
Interest $ 101 $ 352
-------- --------
-------- --------
Income Taxes $ 58 $ 16
-------- --------
-------- --------
Net assets sold for assumption of debt and reduction of receivable $ -- $ 2,944
-------- --------
-------- --------
</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 on form 10K 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 December
31, 1997, the results of operations for the three months and six months
ended December 31, 1997 and 1996 and the cash flows for the six months
ended December 31, 1997 and 1996. The results of operations for the three
month and six month periods ended December 31, 1997 and 1996 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 statement
for the year ended June 30, 1997
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.
EARNINGS PER COMMON SHARE
In February 1997, the Financial Accounting Standards Board issued a new
statement titled "EARNINGS PER SHARE"("FAS 128"). The new statement is
effective for both interim and annual periods ending after December 15,
1997. FAS 128 replaces the presentation of primary and fully diluted
earnings per share with the presentation of basic and diluted earnings per
share. Basic earnings per share excludes dilution and is calculated by
dividing income available to common stockholders by the weighted-average
number of common shares outstanding for the period. Diluted earnings per
share reflects the potential dilution that could occur if securities or
other contracts to issue common stock were exercised or converted into
common stock or resulted in the issuance of common stock that then shared
in the earnings of the entity. Common stock equivalents as of
December 31, 1996 were anti-dilutive and excluded in the earnings per
share computation.
IMPACT OF RECENTLY ISSUED STANDARDS
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards 130, "REPORTING COMPREHENSIVE INCOME" and Statement of
Financial Accounting Standards 131 "DISCLOSURES ABOUT SEGMENTS OF AN
ENTERPRISE AND RELATED INFORMATION." Statement 130 establishes standards
for reporting and display of comprehensive income, its components and
accumulated balances. Comprehensive income is defined to include all
changes in equity except those resulting from investments by owners and
distributions to owners. Among other disclosures, Statement 130 requires
that all items that are required to be recognized under current accounting
standards as components of comprehensive income be reported in a financial
statement that displays such information with the same prominence as other
financial statements. Statement 131 supersedes Statement of Financial
Accounting Standards 14 "FINANCIAL REPORTING FOR SEGMENTS OF A BUSINESS
ENTERPRISE." Statement 131 establishes standards on the way that public
companies report financial information about operating segments in annual
financial statements and requires reporting of selected information about
operating segments to interim financial statements issued to the public. It
also establishes standards for disclosures regarding products and services,
6
<PAGE>
geographic areas and major customers. Statement 131 defines operating
segments as components of a company about which separate financial
information is available that is evaluated regularly by the chief
operating decision maker in deciding how to allocate resources and in
assessing performance.
Statements 130 and 131 are effective for financial statements for periods
beginning after December 15, 1997 and require comparative information for
earlier years to be restated. Because of the recent issuance of these
standards, management has been unable to fully evaluate the impact, if any,
the standards may have on the future financial statement disclosures.
Results of operations and financial position, however, will be unaffected
by implementation of these standards.
3. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following (000 omitted):
December 31, June 30, Estimated
1997 1997 Useful Lives
------------ -------- ------------
Furniture and office equipment $ 166 $ 144 4 to 5 years
Leasehold improvements 82 72 life of lease
----- -----
248 216
Less accumulated depreciation
and amortization 128 (106)
----- -----
$ 120 $ 110
----- -----
----- -----
4. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts payable and accrued liabilities consisted of the following (000
omitted):
December 31, June 30,
1997 1997
------------ --------
Accounts payable $ 2,562 $ 2,331
Accrued purchased transportation 1,954 1,448
Other accrued expenses 17 833
------- -------
$ 4,533 $ 4,612
------- -------
------- -------
7
<PAGE>
5. EARNING PER SHARE (In Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
For the Three Months Ended For the Six Months Ended
December 31, December 31,
-------------------------- ------------------------
1997 1996 1997 1996
---- ---- ---- ----
Basic Earnings Per Share
<S> <C> <C> <C> <C>
Net income (loss) $ 212 $(4,199) $ 405 $(4,295)
Less - preferred stock dividends -- -- -- --
--------- ------- --------- -------
Net income applicable to
common shareholders $ 212 $(4,199) $ 405 $(4,295)
--------- ------- --------- -------
--------- ------- --------- -------
Weighted average number of common shares 4,248,100 960,000 4,248,100 960,000
--------- ------- --------- -------
--------- ------- --------- -------
Basic Earnings per Share 0.05 (4.37) 0.10 (4.47)
--------- ------- --------- -------
--------- ------- --------- -------
Diluted Earnings per Share
Net income from primary income per
common share 212 (4,199) 405 (4,295)
Add:
preferred stock dividend -- -- -- --
--------- ------- --------- -------
Net income for diluted earnings per share 212 (4,199) 405 (4,295)
--------- ------- --------- -------
--------- ------- --------- -------
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 735,073 -- 735,073 --
--------- ------- --------- -------
Weighted average number of shares used in
calculation of diluted earnings per share 4,983,173 960,000 4,983,173 960,000
--------- ------- --------- -------
--------- ------- --------- -------
Diluted Earnings per Share $ 0.04 $ (4.37) $ 0.08 $ (4.47)
--------- ------- --------- -------
--------- ------- --------- -------
</TABLE>
8
<PAGE>
6. DISCONTINUED SUBSIDIARY
Having experienced significant losses in the long-haul trucking operation,
Country Wide Truck Service, Inc. discontinued it's operation. On December
31, 1996, CW Truck made a General Assignment of all its assets for the pro
rata benefit of all its creditors. In conjunction with the General
Assignment, CW Truck sold all of its rolling stock assets for the
outstanding debt on the equipment. Revenues applicable to the discontinued
subsidiary were approximately $7,600,000, $22,700,000 and $29,100,000 for
the years ended June 30, 1997, 1996 and 1995, respectively. Revenue
applicable to the discontinued subsidiary for the three months ended
December 31, 1996, was $3,294,038, and for the six months ended December
31, 1996 was $7,587,771.
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Net income from continuing operations for the three months and six months
ended December 31, 1997 amounted to $212,148 and $404,779 respectively
compared to a net loss of $(4,199,000) and $(4,295,000) for the prior year
periods. The improved 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 December 31, 1997
decreased 13.8% to $8,655,770 from $10,038,327 for the same three month
period of fiscal year 1996, while six month transportation revenue decreased
16.7% to $17,152,517 from $20,585,451 for the six month period of fiscal year
1996. The reduction in revenue for the three and six month period ended
December 31, 1997 was a result of the liquidation of the trucking subsidiary
effective December 31, 1996 which had revenue in the three month period and
six month period ended December 31, 1996 of $3,294,038 and $7,587,771
respectively. Transportation revenue for the Company's Vertex
Transportation, Inc. subsidiary increased 14.1% to $8,655,770 for the three
month period ended December 31, 1997, from $7,589,359 for the prior year
period. For the six month period ended December 31,1997 the Vertex
Transportation revenue increased 15% to $17,152,517 from $14,917,299 for the
prior year period.
Operating costs for the three month period and six month period ended
December 31, 1997 decreased by $5,271,000 and $7,514,000 from the respective
prior year period. As a percentage of sales, operating costs for the three
month period and six month period ended December 31, 1997, decreased 39.2%
and 20.4% respectively from the prior year period. This change is primarily
attributable to the discontinuance of the trucking subsidiary partially
offset by increased purchase transportation cost inherent in the logistics
business.
Depreciation and amortization expense for the three month period and six
month period ended December 31, 1997 was $41,000 and $82,000 respectively as
compared with $2,291,000 and $2,550,000 for the prior year periods. Interest
expense was reduced to $57,000 for the three month period and $101,000 for
the six month period ending December 31, 1997 as compared to $176,000 and
$351,000 for the prior year periods. The decrease in depreciation and
amortization expense is due to the liquidation of the trucking subsidiary
and sale of the rolling stock. The decrease in interest is due to reduced
borrowings and an improved lending rate.
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. 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 December 31, 1997 of $8,665,770
from $7,589,359 in the prior year period resulted in an increase in that
subsidiary's net income of 165.3% to $344,637 from $129,890. For the six
month period ending December 31, 1997 sales increased to $17,152,517 from
$14,917,299 in the prior year period resulting in an increase in that
subsidiary's net income of 76% to $648,785 from $368,577 for the prior year
period.
10
<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
is limited to 80% of eligible accounts receivable. The agreement bears an
interest rate at the bank's prime lending rate plus 2 1/2% and is secured by
essentially all of the Company's assets.
Effective April 29, 1997 the Company's previous revolving credit line in the
amount of $2,173,171 was paid. As of December 31, 1997 the Company had
borrowings of $2,857,904 and unused borrowing capacity of $995,101 under the
new credit facility.
At December 31, 1997, the Company's ratio of current assets to current
liabilities and its debt to equity were 1.1:1 and 31:1, respectively, as
compared to 0.8:1 and (44):1, respectively at June 30, 1997.
The Company ended the December 31, 1997 period with $4,000 of cash and
working capital of $405,000. Based upon the Company's expected cash flow from
operations and funds available as of April 29, 1997, from its new credit
facility, management believes that the Company's capital resources are
sufficient to meet its presently anticipated operating needs.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
11
<PAGE>
COUNTRY WIDE TRANSPORT SERVICES, INC.
AND CONSOLIDATED SUBSIDIARY COMPANIES
PART II.
ITEM 5. OTHER INFORMATION
During the fiscal year ended June 30, 1995, the Company discontinued it's
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.
During the quarter ended December 31, 1996, the Company discontinued all
operations relating to it's wholly owned subsidiary, CW Truck. On December
31, 1996 the Company made a General Assignment of all the assets of CW Truck
for the pro rata benefit of all creditors of the subsidiary. In conjunction
with the General Assignment the Company, on December 31, 1996, sold all the
rolling stock assets of the Company for all the outstanding debt on the
equipment.
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
12
<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.
COUNTRY WIDE TRANSPORT SERVICES, INC.
-------------------------------------
Registrant
DATED: February 10, 1998 /s/ Timothy Lepper
-------------------------------------
Timothy Lepper, President
Chief Executive Officer
Chief Financial Officer
and Principal Accounting Officer
13
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> OCT-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 4
<SECURITIES> 0
<RECEIVABLES> 5385
<ALLOWANCES> 75
<INVENTORY> 0
<CURRENT-ASSETS> 5387
<PP&E> 248
<DEPRECIATION> 128
<TOTAL-ASSETS> 8093
<CURRENT-LIABILITIES> 4982
<BONDS> 0
0
0
<COMMON> 425
<OTHER-SE> (172)
<TOTAL-LIABILITY-AND-EQUITY> 8093
<SALES> 17153
<TOTAL-REVENUES> 17153
<CGS> 0
<TOTAL-COSTS> 16589
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 101
<INCOME-PRETAX> 463
<INCOME-TAX> 58
<INCOME-CONTINUING> 405
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 405
<EPS-PRIMARY> .10
<EPS-DILUTED> .08
</TABLE>
