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, 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, New York 14445
(Address of principal executive offices) (Zip Code)
(716) 381-5470
(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 requirements for the past 90 days. Yes _X_ No ___
The number of shares of Common Stock outstanding as of February 2, 1999 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, 1998
and June 30, 1998 3
Condensed Consolidated Statements of Operations--Three
Months and Six Months Ended December 31, 1998 and 1997 4
Condensed Consolidated Statements of Cash Flows--Six
Months Ended December 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
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 8-K 10
Signatures 11
<PAGE>
COUNTRY WIDE TRANSPORT SERVICES, INC.
and Consolidated Subsidiary Companies
Condensed Consolidated Balance Sheets
(In Thousands)
<TABLE>
<CAPTION>
December 31, June 30,
1998 1998*
----------- --------
ASSETS (Unaudited)
<S> <C> <C>
Current assets:
Cash $ 12 $ 6
Accounts receivable, net 5,046 5,548
Accounts receivable, miscellaneous 137 112
Driver advances 15 13
Prepaid expenses 43 38
------- -------
Total current assets 5,253 5,717
Property and equipment, net 263 263
Other assets:
Deposits 35 34
Excess of purchase price over fair value of net assets acquired, net 2,459 2,518
------- -------
Total assets $ 8,010 $ 8,532
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 4,735 $ 5,088
Liabilities in excess of assets of discontinued subsidiary 127 150
------- -------
Total current liabilities 4,862 5,238
Long-term debt, less current portion 2,056 2,514
------- -------
Total liabilities 6,918 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 Dec. 31, 1998 and June 30, 1998 respectively 425 425
Additional paid-in capital 8,110 8,110
Accumulated deficit (7,443) (7,755)
------- -------
Total stockholders' equity 1,092 780
------- -------
Total liabilities and stockholders' equity $ 8,010 $ 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)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
December 31, December 31,
-------------------------- --------------------------
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Transportation revenue $ 9,385 $ 8,656 $ 18,766 $ 17,153
-------- -------- -------- --------
Operating costs and expenses:
Purchased transportation 8,128 7,572 16,367 15,066
Salaries and related expenses 584 455 1,156 901
Operating expenses 39 45 71 89
General supplies and expenses 434 236 662 451
Depreciation and amortization 50 41 99 82
-------- -------- -------- --------
Total operating costs and expenses 9,235 8,349 18,355 16,589
-------- -------- -------- --------
Operating income 150 307 411 564
Other income (expense):
Interest expense (50) (57) (102) (101)
Other, net -- -- 2 --
-------- -------- -------- --------
Income before provision for income taxes 100 250 311 463
Income tax expense -- 38 -- 58
-------- -------- -------- --------
Net income $ 100 $ 212 $ 311 $ 405
======== ======== ======== ========
Earnings per common share:
Basic $ 0.02 $ 0.05 $ 0.07 $ 0.10
======== ======== ======== ========
Diluted $ 0.02 $ 0.04 $ 0.06 $ 0.08
======== ======== ======== ========
</TABLE>
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,
---------------------
1998 1997
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 311 $ 405
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 99 82
(Increase) decrease in
Accounts receivable 502 (1,261)
Accounts receivable - miscellaneous (25) 5
Driver advance (2) (2)
Prepaid expenses (5) (4)
Deposits (1) --
Increase (decrease) in:
Notes payable - current portion -- 13
Accounts payable and accrued liabilities (353) (239)
Liabilities in excess of discontinued subsidiary (23) (56)
Liabilities in excess of discontinued operations -- (35)
-------- --------
Net cash provided by (used in) operating activities 503 (1,092)
-------- --------
Cash flows from investing activities:
Additions to property and equipment (39) (24)
-------- --------
Net cash used in investing activities (39) (24)
-------- --------
Cash flows from financing activities:
Principal payments on borrowings $(19,359) $(15,975)
Proceeds from borrowings 18,901 17,085
-------- --------
Net cash provided by (used in) financing activities (458) 1,110
-------- --------
Increase (decrease) in cash 6 (6)
Cash, beginning of period 6 10
-------- --------
Cash, end of period $ 12 $ 4
======== ========
Supplemental disclosure of cash flow information:
Cash paid for:
Interest $ 107 $ 101
======== ========
Income Taxes $ -- $ 58
======== ========
</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, 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 December
31, 1998, the results of operations for the three months and six months
ended December 31, 1998 and 1997 and the cash flows for the six months
ended December 31, 1998 and 1997. The results of operations for the three
month and six month periods ended December 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 audited consolidated financial statement
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):
December 31, June 30, Estimated
1998 1998 Useful Lives
----------- ------- ------------
Furniture and office equipment $ 305 $ 268 4 to 5 years
Leasehold improvements 155 154 life of lease
----- -----
460 422
Less accumulated depreciation (197) (159)
----- -----
$ 263 $ 263
===== =====
4. Accounts Payable and Accrued Liabilities
Accounts payable and accrued liabilities consisted of the following (000
omitted):
December 31, June 30,
1998 1998
----------- --------
Accounts payable $2,815 $2,913
Accrued purchased transportation 1,692 1,948
Other accrued expenses 228 227
------ ------
$4,735 $5,088
====== ======
6
<PAGE>
5. Earnings Per Share (In Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
For the Three Months Ended For the Six Months Ended
December 31, December 31,
---------------------------- -----------------------------
1998 1997 1998 1997
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Basic Earnings Per Share
Net income (loss) $ 100 $ 212 $ 311 $ 405
Less - preferred stock dividends -- -- -- --
---------- ---------- ---------- ----------
Net income applicable to
common shareholders $ 100 $ 212 $ 311 $ 405
========== ========== ========== ==========
Weighted average number of common shares 4,248,100 4,248,100 4,248,100 4,248,100
========== ========== ========== ==========
Basic Earnings per Share 0.02 0.05 0.07 0.10
========== ========== ========== ==========
Diluted Earnings per Share
Net income from primary income per
common share 100 212 311 405
Add:
preferred stock dividend -- -- -- --
---------- ---------- ---------- ----------
Net income for diluted earnings per share 100 212 311 405
========== ========== ========== ==========
Weighted average number of shares used in
calculating basic earnings per common share 4,248,100 4,248,100 4,248,100 4,248,100
Add - common equivalent shares (determined
using the "treasury stock" method) representing
shares issuable upon exercise of options 752,321 735,073 754,594 735,073
---------- ---------- ---------- ----------
Weighted average number of shares used in
calculation of diluted earnings per share 5,000,421 4,983,173 5,002,694 4,983,173
========== ========== ========== ==========
Diluted Earnings per Share $ 0.02 $ 0.04 $ 0.06 $ 0.08
========== ========== ========== ==========
</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 months and six months ended December 31, 1998 amounted
to $99,946 and $310,604 respectively compared to $212,148 and $404,779 for the
prior year periods. The earnings decrease was due to increased costs in payroll
and general expenses related to the addition and training of personnel.
Revenue for the three month period ended December 31, 1998 increased 8.4% to
$9,384,998 from $8,655,770 for the same three month prior year period, while six
month revenue increased 9.4% to $18,765,701 from $17,152,517 for the six month
prior year period. The increase in revenue was the result of existing account
penetration as well as new business. The increase for the three month period
ending December 31, 1998, was negatively affected by a decrease in expected
revenue from the Company's largest customer. The Company has been notified by
this customer to expect decreasing revenues throughout the remainder of the year
due to cost cutting programs initiated by the customer.
Operating costs for the three month and six month period ended December 31, 1998
increased by $885,614 and $1,767,367 from the respective prior year period. As a
percentage of sales, operating costs for the three month and six month period
ended December 31, 1998, increased 2% and 1.1% respectively from the prior year
period. The increased costs were related to an increase in personnel and
additional expenses from our consulting division.
Depreciation and amortization expense for the three month and six month period
ended December 31, 1998 was $49,767 and $98,661 respectively as compared with
$41,139 and $82,277 for the prior year periods. Interest expense was $50,228 for
the three month period and $102,352 for the six month period ending December 31,
1998 as compared to $56,513 and $101,280 for the prior year periods.
In expectation of increasing business level and the beginning of a new solutions
division, the Company invested in new personnel. Due to a decrease in business
from the Company's largest customer and a delay in the implementation of a new
customer, the results were a decrease in operating and net income.
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%. At December 31, 1998 the
Company had borrowings of $2,056,546 and unused borrowing capacity of
$1,612,113.
At December 31, 1998, the Company's ratio of current assets to current
liabilities and its debt to equity were 1.1:1 and 6.3:1, respectively, as
compared to 1.09:1 and 9.9:1, respectively at June 30, 1998.
The Company ended the December 31, 1998 period with $12,000 of cash and working
capital of $391,583. Based upon the Company's expected cash flow from operations
and funds available as of December 31, 1998, from its credit facility,
management believes that the Company's capital resources are sufficient to meet
its presently anticipated operating needs.
8
<PAGE>
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 spring 1999 the Company will be administering testing scenarios.
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>
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
<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 5, 1999 /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> 6-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JUL-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 12
<SECURITIES> 0
<RECEIVABLES> 5,258
<ALLOWANCES> 75
<INVENTORY> 0
<CURRENT-ASSETS> 5,253
<PP&E> 460
<DEPRECIATION> 197
<TOTAL-ASSETS> 8,010
<CURRENT-LIABILITIES> 4,862
<BONDS> 0
0
0
<COMMON> 425
<OTHER-SE> 667
<TOTAL-LIABILITY-AND-EQUITY> 8,010
<SALES> 18,766
<TOTAL-REVENUES> 18,766
<CGS> 17,594
<TOTAL-COSTS> 18,355
<OTHER-EXPENSES> (2)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 102
<INCOME-PRETAX> 311
<INCOME-TAX> 0
<INCOME-CONTINUING> 311
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 311
<EPS-PRIMARY> 0.073
<EPS-DILUTED> 0.062
</TABLE>
